chapter 388 (hb 634) - legislative research commission · section 1. a new section of subtitle 7 of...

CHAPTER 388 PDF p. 1 of 53

LEGISLATIVE RESEARCH COMMISSION PDF VERSION

CHAPTER 388

(HB 634)

AN ACT relating to investments.

Be it enacted by the General Assembly of the Commonwealth of Kentucky:

SECTION 1. A NEW SECTION OF SUBTITLE 7 OF KRS CHAPTER 304 IS CREATED

TO READ AS FOLLOWS:

As used in this subtitle:

(1) "Acceptable collateral" means:

(a) As to securities lending transactions, and for the purpose of calculating counterparty

exposure amount, cash, cash equivalents, letter of credit, direct obligations of, or

securities that are fully guaranteed as to principal and interest by, the government of

the United States, any agency of the United States, the Federal National Mortgage

Association, or the Federal Home Loan Mortgage Corporation, and as to lending

foreign securities, sovereign debt rated 1 by the SVO;

(b) As to repurchase transactions, cash, cash equivalents, direct obligations of, or

securities that are fully guaranteed as to principal and interest by, the government of

the United States, any agency of the United States, the Federal National Mortgage

Association, or the Federal Home Loan Mortgage Corporation; and (c) As to reverse

repurchase transactions, cash and cash equivalents.

(2) "Acceptable private mortgage insurance" means insurance written by a private insurer

protecting a mortgage lender against loss occasioned by a mortgage loan default and issued

by a licensed mortgage insurance company, with an SVO 1 designation or a rating issued

by a nationally recognized statistical rating organization equivalent to an SVO 1

designation, that covers losses to an eighty percent (80%) loan-to-value ratio.

(3) "Accident and health insurance" means protection that provides payment of benefits for

covered sickness or accidental injury, excluding credit insurance, disability insurance,

accidental death and dismemberment insurance, and long-term care insurance.

(4) "Accident and health insurer" means a licensed life or health insurer or health service

corporation whose insurance premiums and required statutory reserves for accident and

health insurance constitute at least ninety-five percent (95%) of total premium

considerations or total statutory required reserves, respectively.

(5) "Admitted assets" means assets permitted to be reported as admitted assets in accordance

with Subtitle 6 of KRS Chapter 304 on the statutory financial statement of the insurer most

recently required to be filed with the commissioner, but excluding assets of separate

accounts.

(6) "Affiliate" means, as to any person, another person that, directly or indirectly through one

(1) or more intermediaries, controls, is controlled by, or is under common control with the

person.

(7) "Asset-backed security" means a security or other instrument, excluding a mutual fund,

evidencing an interest in, or the right to receive payments from, or payable from

distributions on, an asset, a pool of assets, or specifically divisible cash flows that are legally



transferred to a trust or another special purpose bankruptcy-remote business entity, on the

following conditions:

(a) The trust or other business entity is established solely for the purpose of acquiring

specific types of assets or rights to cash flows, issuing securities and other instruments

representing an interest in or right to receive cash flows from those assets or rights,

and engaging in activities required to service the assets or rights and any credit

enhancement or support features held by the trust, or other business entity; and

(b) The assets of the trust or other business entity consist solely of interest bearing

obligations or other contractual obligations representing the right to receive payment

from the cash flows from the assets or rights. However, the existence of credit

enhancement, such as letters of credit or guarantees, or support features such as swap

agreements, shall not cause a security or other instrument to be ineligible as an asset-

backed security.

(8) "Business entity" includes a sole proprietorship, corporation, limited liability company,

association, partnership, joint stock company, joint venture, mutual fund, trust, joint

tenancy, or other similar form of business organization, whether organized for profit or

not-for-profit.

(9) "Cap" means an agreement obligating the seller to make payments to the buyer, with each

payment based on the amount by which a reference price, level, or the performance or value

of one (1) or more underlying interests exceeds a predetermined number, sometimes called

the strike rate or strike price.

(10) "Capital and surplus" means the sum of the capital and surplus of the insurer required to

be shown on the statutory financial statement of the insurer most recently required to be

filed with the commissioner.

(11) "Cash equivalents" means short-term, highly rated, and highly liquid investments or

securities readily convertible to known amounts of cash without penalty and so near

maturity that they present insignificant risk of change in value. Cash equivalents include

government money market mutual funds and class one money market mutual funds. For

purposes of this definition:

(a) "Short-term" means investments with a remaining term to maturity of ninety (90)

days or less; and

(b) "Highly rated" means an investment rated P-1 by Moody's Investors Service, Inc., or

A-1 by Standard and Poor's division of The McGraw-Hill Companies, Inc. or its

equivalent rating by a nationally recognized statistical rating organization recognized

by the SVO.

(12) "Class one bond mutual fund" means a mutual fund that at all times qualifies for

investment using the bond class one reserve factor under the Purposes and Procedures of

the Securities Valuation Office, or any successor publication.

(13) "Class one money market mutual fund" means a money market mutual fund that at all

times qualifies for investment using the bond class one reserve factor under the Purposes

and Procedures of the Securities Valuation Office, or any successor publication.

(14) "Code" means KRS Chapter 304 and all administrative regulations promulgated as

authorized.



(15) "Collar" means an agreement to receive payments as the buyer of an option, cap, or floor

and to make payment as the seller of a different option, cap, or floor.

(16) "Commercial mortgage loan" means a loan secured by a mortgage, other than a residential

mortgage loan.

(17) "Construction loan" means a loan of less than three (3) years in term, made for financing

the cost of construction of a building or other improvement to real estate, that is secured by

the real estate.

(18) "Control" means the possession, directly or indirectly, of the power to direct, or cause the

direction of the management and policies of a person, whether through the ownership of

voting securities, by contract other than a commercial contract for goods or

nonmanagement services, or otherwise, unless the power is the result of an official position

with or corporate office held by the person. Control shall be presumed to exist if a person,

directly or indirectly, owns, controls, holds with the power to vote, or holds proxies

representing ten percent (10%) or more of the voting securities of another person. This

presumption may be rebutted by a showing that control does not exist in fact. The

commissioner may determine, after furnishing all interested persons notice and an

opportunity to be heard and making specific findings of fact to support the determination,

that control exists in fact, notwithstanding the absence of a presumption to that effect.

(19) "Counterparty exposure amount" means:

(a) The net amount of credit risk attributable to a derivative instrument entered into with

a business entity other than through a qualified exchange, qualified foreign

exchange, or cleared through a qualified clearinghouse ("over-the-counter derivative

instrument"). The amount of credit risk equals:

1. The market value of the over-the-counter derivative instrument if the liquidation

of the derivative instrument would result in a final cash payment to the insurer;

or

2. Zero (0) if the liquidation of the derivative instrument would not result in a final

cash payment to the insurer.

(b) If over-the-counter derivative instruments are entered into under a written master

agreement that provides for netting of payments owed by the respective parties, and

the domicilary jurisdiction of the counterparty is either within the United States or if

not within the United States, within a foreign jurisdiction listed in the Purposes and

Procedures of the Securities Valuation Office as eligible for netting, the net amount

of credit risk shall be the greater of zero (0) or the net sum of:

1. The market value of the over-the-counter derivative instruments entered into

under the agreement, the liquidation of which would result in a final cash

payment to the insurer; and

2. The market value of the over-the-counter derivative instruments entered into

under the agreement, the liquidation of which would result in a final cash

payment by the insurer to the business entity.

(c) For open transactions, market value shall be determined at the end of the most recent

quarter of the insurer's fiscal year and shall be reduced by the market value of

acceptable collateral held by the insurer or placed in escrow by one (1) or both parties.



(20) "Covered" means that an insurer owns or can immediately acquire, through the exercise

of options, warrants, or conversion rights already owned, the underlying interest in order

to fulfill or secure its obligations under a call option, cap, or floor it has written, or has set

aside under a custodial or escrow agreement, cash, or cash equivalents with a market value

equal to the amount required to fulfill its obligations under a put option it has written, in

an income generation transaction.

(21) "Credit tenant loan" means a mortgage loan that is made primarily in reliance on the credit

standing of a major tenant, structured with an assignment of the rental payments to the

lender with real estate pledged as collateral in the form of a first lien.

(22) (a) "Derivative instrument" means an agreement, option, instrument, a series, or

combination thereof:

1. To make or take delivery of, or assume or relinquish, a specified amount of one

(1) or more underlying interests, or to make a cash settlement in lieu thereof; or

2. That has a price, performance, value, or cash flow based primarily upon the

actual or expected price, level, performance, value, or cash flow of one (1) or

more underlying interests.

(b) Derivative instruments include options, warrants used in a hedging transaction and not

attached to another financial instrument, caps, floors, collars, swaps, forwards,

futures, any other agreements, options, or instruments substantially similar thereto,

or any series or combination thereof, and any agreements, options, or instruments

permitted under administrative regulations promulgated under Section 6 of this Act.

Derivative instruments shall not include an investment authorized by Sections 9 to 15,

17, and 23 to 28 of this Act.

(23) "Derivative transaction" means a transaction involving the use of one (1) or more

derivative instruments.

(24) "Direct" or "directly", when used in connection with an obligation, means that the

designated obligor is primarily liable on the instrument representing the obligation.

(25) "Dollar roll transaction" means two (2) simultaneous transactions with different

settlement dates no more than ninety-six (96) days apart, so that in the transaction with the

earlier settlement date, an insurer sells to a business entity, and in the other transaction the

insurer is obligated to purchase from the same business entity, substantially similar

securities of the following types:

(a) Asset-backed securities issued, assumed, or guaranteed by the Government National

Mortgage Association, the Federal National Mortgage Association, the Federal Home

Loan Mortgage Corporation, or their respective successors; and

(b) Other asset-back securities referred to in Section 106 of Title I of the Secondary

Mortgage Market Enhancement Act of 1984 (15 U.S.C. sec. 77r-1), as amended.

(26) "Domestic jurisdiction" means the United States, Canada, any state, any province of

Canada, or any political subdivision of any of the foregoing.

(27) "Equity interest" means any of the following that are not rated credit instruments:

(a) Common stock;

(b) Preferred stock;



(c) Trust certificate;

(d) Equity investment in an investment company other than a money market mutual fund

or a class one bond mutual fund;

(e) Investment in a common trust fund of a bank regulated by a federal or state agency;

(f) An ownership interest in mineral, oil, or gas, the rights to which have been separated

from the underlying fee interest in the real estate where the mineral, oil, or gas are

located;

(g) Instruments that are mandatorily, or at the option of the issuer, convertible to equity;

(h) Limited partnership interests and those general partnership interests authorized

under subsection (4) of Section 4 of this Act;

(i) Member interests in limited liability companies;

(j) Warrants or other rights to acquire equity interests that are created by the person that

owns or would issue the equity to be acquired; or

(k) Instruments that would be rated credit instruments except for the provisions of

subsection (70)(b) of this section.

(28) "Equivalent securities" means:

(a) In a securities lending transaction, securities that are identical to the loaned securities

in all features including the amount of the loaned securities, except as to certificate

number if held in physical form, but if any different security shall be exchanged for

a loaned security by recapitalization, merger, consolidation, or other corporate action,

the different security shall be deemed to be the loaned security;

(b) In a repurchase transaction, securities that are identical to the purchased securities

in all features including the amount of the purchased securities, except as to the

certificate number if held in physical form; or

(c) In a reverse repurchase transaction, securities that are identical to the sold securities

in all features including the amount of the sold securities, except as to the certificate

number if held in physical form.

(29) "Floor" means an agreement obligating the seller to make payments to the buyer in which

each payment is based on the amount by which a predetermined number, sometimes called

the floor rate or price, exceeds a reference price, level, performance, or value of one (1) or

more underlying interests.

(30) "Foreign currency" means a currency other than that of a domestic jurisdiction.

(31) (a) "Foreign investment" means an investment in a foreign jurisdiction, or an investment

in a person, real estate, or asset domiciled in a foreign jurisdiction, that is substantially of

the same type as those eligible for investment under this subtitle, other than Sections 15

and 28 of this Act. An investment shall not be deemed to be foreign if the issuing person,

qualified primary credit source, or qualified guarantor is a domestic jurisdiction or a

person domiciled in a domestic jurisdiction, unless:

1. The issuing person is a shell business entity; and



2. The investment is not assumed, accepted, guaranteed, insured, or otherwise

backed by a domestic jurisdiction or a person that is not a shell business entity,

domiciled in a domestic jurisdiction.

(b) For purposes of this definition:

1. "Shell business entity" means a business entity having no economic substance,

except as a vehicle for owning interests in assets issued, owned, or previously

owned by a person domiciled in a foreign jurisdiction;

2. "Qualified guarantor" means a guarantor against which an insurer has a direct

claim for full and timely payment, evidenced by a contractual right for which

an enforcement action can be brought in a a domestic jurisdiction; and

3. "Qualified primary credit source" means the credit source to which an insurer

looks for payment as in an investment and against which an insurer has a direct

claim for full and timely payment, evidenced by a contractual right for which

an enforcement action can be brought in a domestic jurisdiction.

(32) "Foreign jurisdiction" means a jurisdiction other than a domestic jurisdiction.

(33) "Forward" means an agreement other than a future, to make, take delivery of, or effect a

cash settlement based on the actuarial or expected price, level, performance, or value of

one (1) or more underlying interests.

(34) "Future" means an agreement, traded on a qualified exchange or qualified foreign

exchange, to make, take delivery of, or effect a cash settlement based on the actual or

expected price, level, performance, or value of one (1) or more underlying interest.

(35) "Government money market mutual fund" means a money market mutual fund that at all

times:

(a) Invests only in obligations issued, guaranteed, or insured by the federal government

of the United States or collateralized repurchase agreements composed of these

obligations; and

(b) Qualifies for investment without a reserve under the Purposes and Procedures of the

Securities Valuation Office or any successor publication.

(36) "Government sponsored enterprise" means a :

(a) Governmental agency; or

(b) Corporation, limited liability company, association, partnership, joint stock company,

joint venture, trust, or other entity or instrumentality organized under the laws of any

domestic jurisdiction to accomplish a public policy or other governmental purpose.

(37) "Guaranteed or insured", when used in connection with an obligation acquired under this

subtitle, means that the guarantor or insurer has agreed to:

(a) Perform or insure the obligation of the obligor or purchase the obligation; or

(b) Be unconditionally obligated until the obligation is repaid to maintain in the obligor

a minimum net worth, fixed charge coverage, stockholders' equity, or sufficient

liquidity to enable the obligor to pay the obligation in full.

(38) "Hedging transaction" means a derivative transaction that is entered into and maintained

to reduce:



(a) The risk of a change in the value, yield, price, cash flow, or quantity of assets or

liabilities that the insurer has acquired or incurred or anticipates acquiring or

incurring; or

(b) The currency exchange rate risk or the degree of exposure as to assets or liabilities

that an insurer has acquired or incurred or anticipates acquiring or incurring.

(39) "High grade investment" means a rated credit instrument rated 1 or 2 by the SVO.

(40) "Income" means, as to a security, interest, accrual of discount, dividends, or other

distributions, such as rights, tax or assessment, or assessment credits, warrants, and

distributions in kind.

(41) "Income generation transaction" means a derivative transaction involving the writing of

covered call options, covered put options, covered caps, or covered floors that is intended

to generate income or enhance return.

(42) "Initial margin" means that amount of cash, securities, or other consideration initially

required to be deposited to establish a futures position.

(43) "Insurance future" means a future relating to an index or pool that is based on insurance-

related items.

(44) "Insurance futures option" means an option on an insurance future.

(45) "Investment company" means an investment company as defined in Section 3(a) of the

Investment Company Act of 1940 (15 U.S.C. sec. 80a-1 et seq.), as amended, and a person

described in Section 3(c) of that Act.

(46) "Investment company series" means an investment portfolio of an investment company

that is organized as a series company and to which assets of the investment company have

been specifically allocated.

(47) "Investment practices" means transactions of the types described in Sections 14, 16, 27,

and 29 of this Act.

(48) "Investment subsidiary" means a subsidiary of an insurer engaged or organized to engage

exclusively in the ownership and management of assets authorized as investment for the

insurer if each subsidiary agrees to limit its investment in any asset so that its investments

will not cause the amount of the total investment of the insurer to exceed any of the

investment limitations or avoid any other provisions of this subtitle applicable to the

insurer. As used in this subsection, the total investment of the insurer shall include:

(a) Direct investment by the insurer in an asset; and

(b) The insurer's proportionate share of an investment in an asset by an investment

subsidiary of the insurer, that shall be calculated by multiplying the amount of the

subsidiary's investment by the percentage of the insurer's ownership interest in the

subsidiary.

(49) "Investment strategy" means the techniques and methods used by an insurer to meet its

investment objectives, such as active bond portfolio management, passive bond portfolio

management, interest rate anticipation, growth investing, and value investing.

(50) "Letter of credit" means a clean, irrevocable, and unconditional letter of credit issued or

confirmed by, and payable and presentable at, a financial institution on the list of financial



institutions meeting the standards for issuing letters of credit under the Purposes and

Procedures of the Securities Valuation Office or any successor publication. To constitute

acceptable collateral for the purposes of Sections 14 and 27 of this Act, a letter of credit

shall have an expiration date beyond the term of the subject transaction.

(51) "Limited liability company" means a business organization, excluding partnerships and

ordinary business corporations, organized or operating under the laws of the United States

or any state thereof that limits the personal liability of investors to the equity investment of

the investor in the business entity.

(52) "Lower grade investment" means a rated credit instrument rated 4, 5, or 6 by the SVO.

(53) "Market value" means:

(a) As to cash and letters of credit, the amounts thereof; and

(b) As to security as of any date, the price for the security on that date obtained from a

generally recognized source or the most recent quotation from such a source or, to

the extent no generally recognized source exists, the price for the security as

determined in good faith by the parties to a transaction, plus accrued but unpaid

income thereon to the extent not included in the price as of that date.

(54) "Medium grade investment" means a rated credit instrument rated 3 by the SVO.

(55) "Money market mutual fund" means a mutual fund that meets the conditions of 17 Code

of Federal Regulations Par. 270.2a-7, under the Investment Company Act of 1940 (15

U.S.C. sec. 80a-1 et seq.), as amended or renumbered.

(56) "Mortgage loan" means an obligation secured by a mortgage, deed of trust, trust deed, or

other consensual lien on real estate.

(57) "Multilateral development bank" means an international development organization of

which the United States is a member.

(58) "Mutual fund" means an investment company or, in the case of an investment company

that is organized as a series company, an investment company series, that, in either case, is

registered with the United States Securities and Exchange Commission under the

Investment Company Act of 1940 (15 U.S.C. sec. 80a-1 et seq.), as amended.

(59) "NAIC" means the National Association of Insurance Commissioners.

(60) "Obligation" means a bond, note, debenture, or a trust certificate including an equipment

certificate, production payment, negotiable bank certificate of deposit, bankers' acceptance,

credit tenant loan, loan secured by financing net leases, and other evidence of indebtedness

for the payment of money or participations, certificates, or other evidences of an interest in

any of the foregoing, whether constituting a general obligation of the issuer or payable only

out of certain revenues or certain funds pledged or otherwise dedicated for payment.

(61) "Option" means an agreement giving the buyer the right to buy or receive (a "call option"),

sell or deliver (a "put option"), enter into, extend, terminate, or effect a cash settlement

based on the actual or expected price level, performance or value of one (1) or more

underlying interests.

(62) "Person" means an individual, a business entity, a multilateral development bank, or a

government or quasi-governmental body, such as a political subdivision or a government

sponsored enterprise.



(63) "Potential exposure" means the amount determined in accordance with the NAIC Annual

Statement Instructions.

(64) "Preferred stock" means preferred, preference, or guaranteed stock of a business entity

authorized to issue the stock, that has a preference in liquidation over the common stock of

the business entity.

(65) "Qualified bank" means:

(a) A national bank, state bank, or trust company that at all times is no less than

adequately capitalized as determined by standards adopted by the United States

banking regulators and that is either regulated by state banking laws, or is a member

of the Federal Reserve Bank of New York; or

(b) A bank or trust company incorporated or organized under the laws of a country other

than the United States that is regulated as a bank or trust company by that country's

government or an agency thereof and that at all times is no less than adequately

capitalized as determined by the standards adopted by international banking

authorities.

(66) "Qualified business entity" means a business entity that is:

(a) An issuer of obligations or preferred stock that are rated 1 or 2 by SVO or an issuer

of obligations, preferred stock, or derivative instruments that are rated the equivalent

of 1 or 2 by the SVO or by a nationally recognized statistical rating organization

recognized by the SVO; or

(b) A primary dealer in United States government securities, recognized by the Federal

Reserve Bank of New York.

(67) "Qualified clearinghouse" means a clearinghouse for, and subject to the rules of, a

qualified exchange or a qualified foreign exchange, that provides clearing service,

including acting as a counterparty to each of the parties to a transaction such that the

parties no longer have credit risks as to each other.

(68) "Qualified exchange" means:

(a) A securities exchange registered as a national securities exchange, or a securities

market regulated under the Securities Exchange Act of 1934 (15 U.S.C. sec. 78 et

seq.), as amended;

(b) A board of trade or commodities exchange designated as a contract market by the

Commodity Futures Trading Commission or any successor thereof;

(c) Private Offerings, Resales, and Trading through Automated Linkages (PORTAL);

(d) A designated offshore securities market as defined in Securities Exchange

Commission Regulation S, 17 C.F.R. Part 230, as amended; or (e)

A qualified foreign exchange.

(69) "Qualified foreign exchange" means a foreign exchange, board of trade, or contract

market located outside the United States, its territories, or possessions:

(a) That has received regulatory comparability relief under Commodity Futures Trading

Commission (CFTC) Rule 30.10, as set forth in Appendix C to Part 30 of the CFTC's

Regulations, 17 C.F.R. Part 30;



(b) That is, or its members are, subject to the jurisdiction of a foreign futures authority

that has received regulatory comparability relief under CFTC Rule 30.10, as set forth

in Appendix C to Part 30 of the CFTC's Regulations, 17 C.F.R. Part 30, as to futures

transactions in the jurisdiction where the exchange, board of trade, or contract

market is located; or

(c) Upon which foreign stock index futures contracts are listed that are the subject of no-

action relief issued by the CFTC's Office of General Counsel, provided that an

exchange, board of trade, or contract market that qualifies as a qualified foreign

exchange only under this subsection shall only be a qualified foreign exchange as to

foreign stock index futures contracts that are the subject of no-action relief.

(70) (a) "Rated credit instrument" means a contractual right to receive cash or another rated

credit instrument from another entity that: 1. Is rated or required to be rated by the SVO;

2. In the case of an instrument with a maturity of three hundred ninety-seven (397)

days or less, is issued, guaranteed, or insured by an entity that is rated by, or

another obligation of the entity is rated by, the SVO or by a nationally

recognized statistical rating organization recognized by the SVO;

3. In the case of an instrument with a maturity of ninety (90) days or less is issued

by a qualified bank;

4. Is a share of a class one bond mutual fund; or

5. Is a share of a money market mutual fund.

(b) However, "rated credit instrument" does not mean:

1. An instrument that is mandatorily, or at the option of the issuer, convertible to

an equity interest; or

2. A security that has a par value and whose terms provide that the issuer's net

obligation to repay all or part of the security's par value is determined by

reference to the performance of an equity, a commodity, a foreign currency, or

an index of equities, commodities, foreign currencies, or combinations thereof.

(71) "Real estate" means:

(a) 1. Real property;

2. Interests in real property, such as leaseholds, minerals, oil, and gas that have

not been separated from the underlying fee interest;

3. Improvements and fixtures located on or in real property; and

4. The seller's equity in a contract providing for a deed of real estate.

(b) As to a mortgage on a leasehold estate, real estate shall include the leasehold estate

only if it has an unexpired term, including renewal options exercisable at the option

of the lessee, extending beyond the scheduled maturity date of the obligation that is

secured by a mortgage on the leasehold estate by a period equal to at least twenty

percent (20%) of the original term of the obligation or ten (10) years, whichever is

greater.

(72) "Replication transaction" means a derivative transaction that is intended to replicate the

performance of one (1) or more assets that an insurer is authorized to acquire under this



subtitle. A derivative transaction that is entered into as a hedging transaction shall not be

considered a replication transaction.

(73) "Repurchase transaction" means a transaction in which an insurer purchases securities

from a business entity that is obligated to repurchase the purchased securities or equivalent

securities from the insurer at a specified price, either within a specified period of time or

upon demand.

(74) "Required liabilities" means total liabilities required to be reported on the statutory

financial statement of the insurer most recently required to be filed with the commissioner.

(75) "Residential mortgage loan" means a loan primarily secured by a mortgage on real estate

improved with a one (1) to four (4) family residence.

(76) "Reverse repurchase transaction" means a transaction in which an insurer sells securities

to a business entity and is obligated to repurchase the sold securities or equivalent securities

from the business entity at a specified price, either within a specified period of time or upon

demand.

(77) "Secured location" means the contiguous real estate owned by one (1) person.

(78) "Securities lending transaction" means a transaction in which securities are loaned by an

insurer to a business entity that is obligated to return the loaned securities or equivalent

securities to the insurer, either within a specified period of time or upon demand.

(79) "Series company" means an investment company that is organized as a series company, as

defined in Rule 18f-2(a) adopted under the Investment Company Act of 1940 (15 U.S.C.

sec. 80a-1 et seq.), as amended.

(80) "Sinking fund stock" means preferred stock that:

(a) Is subject to a mandatory sinking fund or similar arrangement that will provide for

the redemption or open market purchase of the entire issue over a period not longer

than forty (40) years from the date of acquisition; and

(b) Provides for mandatory sinking fund installments or open market purchases

commencing not more than ten and one-half (10 1/2) years from the date of issue,

with the sinking fund installments providing for the purchase or redemption, on a

cumulative basis commencing ten (10) years from the date of issue, of at least two and

one-half percent (2.5%) per year of the original number of shares of that issue of

preferred stock.

(81) "Special rated credit instrument" means a rated credit instrument that is:

(a) An instrument that is structured so that, if it is held until retired by or on behalf of the

issuer, its rate of return, based on its purchase cost and any cash flow stream possible

under the structure of the transaction, may become negative due to reasons other than

the credit risk associated with the issuer of the instrument; however, a

rated credit instrument shall not be a special rated credit instrument under this

subsection if it is:

1. A share in a class one bond mutual fund;

2. An instrument, other than an asset-backed security, with payments of par value

fixed as to amount and timing, or callable but in any event payable only at par



or greater, and interest or dividend cash flows that are based on either a fixed

or variable rate determined by reference to a specified rate or index;

3. An instrument, other than an asset-backed security, that has a par value and is

purchased at a price not greater than one hundred ten percent (110%) of par;

4. An instrument, including an asset-backed security, whose rate of return would

become negative only as a result of a prepayment due to casualty,

condemnation, or economic obsolescence of collateral or change of law;

5. An asset-backed security that relies on collateral that meets the requirements of

subparagraph 2. of this paragraph, the par value of which collateral:

a. Is not permitted to be paid sooner than one-half (1/2) of the remaining

term to maturity from the date of acquisition;

b. Is permitted to be paid prior to maturity only at a premium sufficient to

provide a yield to maturity for the investment, considering the amount

prepaid and reinvestment rates at the time of early repayment, at least

equal to the yield to maturity of the initial investment; or

c. Is permitted to be paid prior to maturity at a premium at least equal to the

yield of a Treasury issue of comparable remaining life; or

6. An asset-backed security that relies on cash flows from assets that are not

prepayable at any time at par, but is not otherwise governed by subparagraph 5.

of this paragraph, if the asset-backed security has a par value reflecting

principal payments to be received if held until retired by or on behalf of the

issuer and is purchased at a price no greater than one hundred five percent

(105%) of the par amount.

(b) An asset-backed security that:

1. Relies on cash flows from assets that are prepayable at par at any time;

2. Does not make payments of par that are fixed as to amount and timing; and

3. Has a negative rate of return at the time of acquisition if a prepayment threshold

assumption is used with the prepayment threshold assumption defined as either:

a. Two (2) times the prepayment expectation reported by a recognized,

publicly available source as being the median of expectations contributed

by broker dealers or other entities, except insurers, engaged in the business

of selling or evaluating the securities or assets. The prepayment

expectation used in this calculation shall be, at the insurer's election, the

prepayment expectation for pass-through securities of the Federal

National Mortgage Association, the Federal Home Loan Mortgage

Corporation, the Government National Mortgage Association, or for other

assets of the same type as the assets that underlie the asset-backed security,

in either case with a gross weighted average coupon comparable to the

gross weighted average coupon of the assets that underlie the asset-backed

security; or

b. Another prepayment threshold assumption specified by the commissioner

by administrative regulation promulgated under Section 6 of this Act.



(c) For purposes of paragraph (b) of this subsection, if the asset-backed security is

purchased in combination with one (1) or more other asset-backed securities that are

supported by identical underlying collateral, the insurer may calculate the rate of

return for these specific combined asset-backed securities in combination. The

insurer shall maintain documentation demonstrating that the securities were

acquired and are continuing to be held in combination.

(82) "State" means a state, territory, or possession of the United States, the District of Columbia,

or the Commonwealth of Puerto Rico.

(83) "Substantially similar securities" means securities that meet all criteria for substantially

similar securities specified in the NAIC Accounting Practices and Procedures manual, as

amended, and in an amount that constitutes good delivery form as determined from time to

time by the Public Securities Administration.

(84) "SVO" means the Securities Valuation Office of the NAIC or any successor office

established by the NAIC.

(85) "Swap" means an agreement to exchange or to net payments at one (1) or more times based

on the actual or expected price, level, performance, or value of one (1) or more underlying

interests.

(86) "Underlying interest" means the assets, liabilities, other interests, or a combination thereof

underlying a derivative instrument, such as any one (1) or more securities, currencies,

rates, indices, commodities, or derivative instruments.

(87) "Unrestricted surplus" means the amount by which total admitted assets exceed one

hundred twenty-five percent (125%) of the insurer's required liabilities.

(88) "Warrant" means an instrument that gives the holder the right to purchase an underlying

financial instrument at a given price and time or at a series of prices and times outlined in

the warrant agreement. Warrants may be issued alone or in connection with the sale of

other securities, for example, as part of a merger, recapitalization agreement, or to facilitate

divestiture of the securities of another business entity.


TO READ AS FOLLOWS:

(1) (a) Insurers may acquire, hold, or invest investments or engage in investment practices as

set forth in this subtitle. Investments not conforming to this subtitle or otherwise expressly

allowed in this chapter shall not be admitted assets.

(b) This subtitle shall apply to investments and investment practices of domestic insurers

and United States branches of alien insurers entered through this state. This subtitle

shall not apply to separate accounts of an insurer except to the extent that the

provisions of Section 31 of this Act so provide.

(2) Subject to subsection (3) of this section, an insurer shall not acquire or hold an investment

as an admitted asset unless at the time of acquisition it is:

(a) Eligible for the payment or accrual of interest or discount, whether in cash or other

securities, eligible to receive dividends or other distributions, or is otherwise income

producing; or



(b) Acquired under Section 13(3), 14, 16, 18, 26(3), 27, 29, or 30 of this Act, or under the

authority of sections of the code other than in this subtitle.

(3) An insurer may acquire or hold as admitted assets investments that do not otherwise qualify

under this subtitle if the insurer has not acquired them for the purpose of circumventing

any limitations contained in this subtitle, if the insurer acquires the investments in the

following circumstances and the insurer complies with the provisions of Section 4 of this

Act as to the investments:

(a) As payment on account of existing indebtedness or in connection with the

refinancing, restructuring, or workout of existing indebtedness, if taken to protect the

insurer's interest in that investment;

(b) As realization on collateral for an obligation;

(c) In connection with an otherwise qualified investment or investment practice, as

interest on a dividend, other distribution related to the investment, investment

practice, or in connection with the refinancing of the investment, in each case for no

additional or only nominal consideration;

(d) Under a lawful and bona fide agreement of recapitalization, voluntary, or involuntary

reorganization in connection with an investment held by the insurer; or

(e) Under a bulk reinsurance, merger, or consolidation transaction approved by the

commissioner if the assets constitute admissible investments for the ceding, merged,

or consolidated companies.

(4) A foreign insurer that becomes a domestic insurer in accordance with KRS 304.24-500 may

hold as admitted assets investments that do not otherwise qualify under this subtitle if the

investments were qualified as admitted assets in the insurer's former state of domicile

immediately prior to the insurer's becoming a Kentucky domestic insurer, if the insurer has

not acquired the investments for the purpose of circumventing any limitations contained in

this subtitle and if the insurer complies with the provisions of Section 4 of this Act as to the

investments.

(5) An investment or portion of an investment acquired by an insurer under subsections (3) or

(4) of this section shall become a nonadmitted asset three (3) years, or five (5) years in the

case of mortgage loans and real estate, from the date of its acquisition, unless within that

period the investment has become a qualified investment under this subtitle other than

subsections (3) or (4) of this section, but an investment acquired under an agreement of

bulk reinsurance, merger, or consolidation may be qualified for a longer period if so

provided in the plan for reinsurance, merger, or consolidation as approved by the

commissioner. Upon application by the insurer and a showing that the nonadmission of an

asset held under subsections (3) or (4) of this section would materially injure the interests

of the insurer, the commissioner may extend the period for admissibility for an additional

reasonable period of time.

(6) Except as provided in subsections (7) and (9) of this section, an investment shall qualify

under this subtitle if, on the date the insurer committed to acquire the investment or on the

date of its acquisition, it would have qualified under this subtitle. For the purposes of

determining limitations contained in this subtitle, an insurer shall give appropriate

recognition to any commitments to acquire investments.



(7) (a) An investment held as an admitted asset by an insurer on the effective date of this Act

that qualified under this subtitle shall remain qualified as an admitted asset under this

subtitle.

(b) Each specific transaction constituting an investment practice of the type described in

this subtitle that was lawfully entered into by an insurer and was in effect on the

effective date of this Act shall continue to be permitted under this subtitle until its

expiration or termination under its terms.

(8) Unless otherwise specified, an investment limitation computed on the basis of an insurer's

admitted assets or capital and surplus shall relate to the amount required to be shown on

the statutory balance sheet of the insurer most recently required to be filed with the

commissioner. For purposes of computing any limitation based upon admitted assets, the

insurer shall deduct from the amount of its admitted assets the amount of the liability

recorded on its statutory balance sheet for:

(a) The return of acceptable collateral received in a reverse repurchase transaction or a

securities lending transaction;

(b) Cash received in a dollar roll transaction; and

(c) The amount reported as borrowed money in the most recently filed financial statement

to the extent not included in paragraphs (a) and (b) of this subsection.

(9) An investment qualified, in whole or in part, for acquisition or holding as an admitted asset

may be qualified or requalified at the time of acquisition or a later date, in whole or in part,

under any other section of this subtitle, if the relevant conditions contained in the other

section of this subtitle are satisfied at the time of qualification or requalification.

(10) An insurer shall maintain documentation demonstrating that investments were acquired in

accordance with this subtitle, and specifying the section of this subtitle under which they

were acquired.

(11) An insurer shall not enter into an agreement to purchase securities in advance of their

issuance for resale to the public as part of a distribution of the securities by the issuer, or

otherwise guarantee the distribution, except that an insurer may acquire privately placed

securities with registration rights.

(12) Notwithstanding the provisions of this subtitle, the commissioner, for good cause, may

order under the state's administrative regulations, an insurer to nonadmit, limit, dispose

of, withdraw from or discontinue an investment or investment practice. The authority of

the commissioner under this subsection is in addition to any other authority of the

commissioner.

(13) Insurance futures and insurance futures options are not considered investments or

investment practices for the purposes of this subtitle.


TO READ AS FOLLOWS:

(1) An insurer's board of directors shall adopt a written plan for acquiring and holding

investments and for engaging in investment practices that specifies guidelines as to the

quality, maturity, diversification of investments, and other specifications including

investment strategies intended to assure that the investments and investment practices are



appropriate for the business conducted by the insurer, its liquidity needs, and its capital

and surplus. The board shall review and assess the insurer's technical investment and

administrative capabilities and expertise before adopting a written plan concerning an

investment strategy or investment practice.

(2) Investments acquired and held under this subtitle shall be acquired and held under the

supervision and direction of the board of directors of the insurer. The board of directors

shall evidence by formal resolution, at least annually, that it has determined whether all

investments have been made in accordance with delegations, standards, limitations, and

investment objectives prescribed by the board or a committee of the board charged with the

responsibility to direct its investments.

(3) On no less than a quarterly basis, and more often if deemed appropriate, an insurer's board

of directors or committee of the board of directors shall:

(a) Receive and review a summary report on the insurer's investment portfolio, its

investment activities, and investment practices engaged in under delegated authority,

in order to determine whether the investment activity of the insurer is consistent with

its written plan; and

(b) Review and revise, as appropriate, the written plan.

(4) In discharging its duties under this section, the board of directors shall require that records

of any authorizations or approvals, other documentation as the board may require, and

reports of any action taken under authority delegated under the plan referred to in

subsection (1) of this section shall be made available on a regular basis to the board of

directors.

(5) In discharging their duties under this section, the directors of an insurer shall perform

their duties in good faith and with that degree of care that ordinarily prudent individuals

in like positions would use under similar circumstances.

(6) If an insurer does not have a board of directors, all references to the board of directors in

this subtitle shall be deemed to be references to the governing body of the insurer having

authority equivalent to that of a board of directors.


TO READ AS FOLLOWS:

An insurer shall not, directly or indirectly:

(1) Invest in an obligation or security or make a guarantee for the benefit of or in favor of an

officer or director of the insurer, except as provided in Section 5 of this Act;

(2) Invest in an obligation or security, make a guarantee for the benefit of or in favor of, or

make other investments in a business entity of which ten percent (10%) or more of the

voting securities or equity interests are owned directly or indirectly by or for the benefit of

one (1) or more officers or directors of the insurer, except as authorized in KRS 304.37110,

or provided in Section 5 of this Act;

(3) Engage on its own behalf or through one (1) or more affiliates in a transaction or series of

transactions designed to evade the prohibitions of this subtitle;

(4) (a) Invest in a partnership as a general partner, except that an insurer may make an

investment as a general partner;



1. If all other partners in the partnership are subsidiaries of the insurer;

2. For the purpose of :

a. Meeting cash calls committed to prior to the effective date of this Act;

b. Completing those specific projects or activities of the partnership in which

the insurer was a general partner as of the effective date of this

Act that had been undertaken as of that date; or

c. Making capital improvements to property owned by the partnership on the

effective date of this Act if the insurer was a general partner as of that

date; or

3. In accordance with subsection (3) of Section 2 of this Act;

(b) This subsection shall not prohibit a subsidiary or other affiliate of the insurer from

becoming a general partner; or

(5) Invest in or lend its funds upon the security of shares of its own stock, except that an insurer

may acquire shares of its own stock for the following purposes, but the shares shall not be

admitted assets of the insurer;

(a) Conversion of a stock insurer into a mutual or reciprocal insurer or a mutual or

reciprocal insurer into a stock insurer;

(b) Issuance to the insurer's officers, employees, or agents in connection with a plan

approved by the commissioner for converting a publicly held insurer into a privately

held insurer or in connection with other stock option and employee benefit plans; or

(c) In accordance with any other plan approved by the commissioner.


TO READ AS FOLLOWS:

(1) (a) Except as provided in subsection (2) of this section, an insurer shall not, without the

prior written approval of the commissioner, directly or indirectly:

1. Make a loan to or invest in an officer or director of the insurer or a person in

which the officer or director has any direct or indirect financial interest;

2. Make a guarantee for the benefit of or in favor of an officer or director of the

insurer or a person in which the officer or director has any direct or indirect

financial interest; or

3. Enter into an agreement for the purchase or sale of property from or to an

officer or director of the insurer or a person in which the officer or director has

any direct or indirect financial interest.

(b) For purposes of this section, an officer or director shall not be deemed to have a

financial interest by reason of an interest that is held directly or indirectly through

the ownership of equity interests representing less than two percent (2%) of all

outstanding equity interests issued by a person that is a party to the transaction, or

solely by reason of that individual's position as a director or officer of a person that

is a party to the transaction.

(c) This subsection does not permit an investment that is prohibited by Section 4 of this

Act.



(d) This subsection does not apply to a transaction between an insurer and any of its

subsidiaries or affiliates that is entered into in compliance with Subtitle 37 of KRS

Chapter 304, other than a transaction between an insurer and its officer or director.

(2) An insurer may make, without the prior written approval of the commissioner;

(a) Policy loans in accordance with the terms of the policy or contract and Section 17 of

this Act;

(b) Advances to officers or directors for expenses reasonably expected to be incurred in

the ordinary course of the insurer's business or guarantees associated with credit or

charge cards issued or credit extended for the purpose of financing these expenses;

(c) Loans secured by the principal residence of an existing or new officer of the insurer

made in connection with the officer's relocation at the insurer's request, if the loans

comply with the requirements of Section 13 or 26 of this Act, and the terms and

conditions otherwise are the same as those generally available from unaffiliated third

parties;

(d) Secured loans to an existing or new officer of the insurer made in connection with

the officer's relocation at the insurer's request, if the loans:

1. Do not have a term exceeding two (2) years;

2. Are required to finance mortgage loans outstanding at the same time on the

prior and new residences of the officer;

3. Do not exceed an amount equal to the equity of the officer in the prior residence;

and

4. Are required to be fully repaid upon the earlier of the end of the two (2) year

period or the sale of the prior residence; and

(e) Loans and advances to officers or directors made in compliance with state or federal

law specifically related to the loans and advances by a regulated noninsurance

subsidiary or affiliate of the insurer in the ordinary course of business and on terms

no more favorable than available to other customers of the entity.


TO READ AS FOLLOWS:

The commissioner may promulgate administrative regulations implementing the provisions of

this subtitle.


TO READ AS FOLLOWS:

Sections 7 to 18 of this Act shall apply to the investments and investment practices of domestic

life and health insurers, and of United States branches of alien life and health insurers entered

through this state.


TO READ AS FOLLOWS:

(1) (a) Except as otherwise specified in this subtitle, an insurer shall not acquire, directly or

indirectly through an investment subsidiary, an investment under this subtitle if, as a result

of and after giving effect to the investment, the insurer would hold more



than three percent (3%) of its admitted assets in investments of all kinds issued,

assumed, accepted, insured, or guaranteed by a single person.

(b) This three percent (3%) limitation shall not apply to the aggregate amounts insured

by a single financial guaranty insurer with the highest generic rating issued by a

nationally recognized statistical rating organization.

(c) Asset-backed securities shall not be subject to the limitations of paragraph (a) of this

subsection, however an insurer shall not acquire an asset-backed security if, as a

result of and after giving effect to the investment, the aggregate amount of

assetbacked securities secured by or evidencing an interest in a single asset or single

pool of assets held by a trust or other business entity, then held by the insurer would

exceed three percent (3%) of its admitted assets.

(2) (a) An insurer shall not acquire, directly or indirectly through an investment subsidiary, an

investment under Sections 9, 12, and 15 of this Act, or counterparty exposure under

subsection (4) of Section 16 of this Act, if, as a a result of and after giving effect to the

investment:

1. The aggregate amount of medium and lower grade investments then held by the

insurer would exceed twenty percent (20%) of its admitted assets;

2. The aggregate amount of lower grade investments then held by the insurer

would exceed ten percent (10%) of its admitted assets;

3. The aggregate amount of investments rated 5 or 6 by the SVO then held by the

insurer would exceed three percent (3%) of its admitted assets;

4. The aggregate amount of investments rated 6 by the SVO then held by the

insurer would exceed one percent (1%) of its admitted assets; or

5. The aggregate amount of medium and lower grade investments then held by the

insurer that receive as cash income less than the equivalent yield for Treasury

issues with a comparative average life, would exceed one percent (1%) of its

admitted assets.

(b) An insurer shall not acquire, directly or indirectly through an investment subsidiary,

an investment under Sections 9, 12, and 15 of this Act, or counterparty exposure

under subsection (4) of Section 16 of this Act, if, as a result of and after giving effect

to the investment:

1. The aggregate amount of medium and lower grade investments issued, assumed,

guaranteed, accepted, or insured by any one (1) person or, as to asset-backed

securities secured by or evidencing an interest in a single asset or pool of assets,

then held by the insurer would exceed one percent (1%) of its admitted assets;

or

2. The aggregate amount of lower grade investments issued, assumed, guaranteed,

accepted, or insured by any one (1) person or, as to asset-backed securities

secured by or evidencing an interest in a single asset or pool of assets, then held

by the insurer would exceed one-half of one percent (0.5%) of its admitted

assets.

(c) If an insurer attains or exceeds the limit of any one (1) rating category referred to in

this subsection, the insurer shall not thereby be precluded from acquiring investments



in other rating categories subject to the specific multicategory limits applicable to

those investments.

(3) (a) An insurer shall not acquire, directly or indirectly through an investment subsidiary, a

Canadian investment authorized by this subtitle, if as a result of and after giving effect to

the investment, the aggregate amount of these investments then held by the insurer would

exceed forty percent (40%) of its admitted assets, or if the aggregate amount of Canadian

investments not acquired under subsection (2) of Section 9 of this Act then held by the

insurer would exceed twenty-five percent (25%) of its admitted assets.

(b) However, as to an insurer that is authorized to do business in Canada or that has

outstanding insurance, annuity, or reinsurance contracts on lives or risks resident or

located in Canada and denominated in Canadian currency, the limitations of

paragraph (a) of this subsection shall be increased by the greater of:

1. The amount the insurer is required by Canadian law to invest in Canada or to

be denominated in Canadian currency; or

2. One hundred fifteen percent (115%) of the amount of its reserves and other

obligations under contracts on lives or risks resident or located in Canada.


TO READ AS FOLLOWS:

Subject to the limitations of subsection (6) of this section, an insurer may acquire rated credit

instruments:

(1) Subject to the limitations of subsection (2) of Section 8 of this Act, but not the limitations

of subsection (1) of Section 8 of this Act, an insurer may acquire rated credit instruments

issued, assumed, guaranteed, or insured by:

(a) The United States; or

(b) A government sponsored enterprise of the United States, if the instruments of the

government sponsored enterprise are assumed, guaranteed, or insured by the United

States, or are otherwise backed or supported by the full faith and credit of the United

States.

(2) (a) Subject to the limitations of subsection (2) of Section 8 of this Act, but not to the

limitations of subsection (1) of Section 8 of this Act, an insurer may acquire rated credit

instruments issued, assumed, guaranteed, or insured by:

1. Canada; or

2. A government sponsored enterprise of Canada, if the instruments of the

government sponsored enterprise are assumed, guaranteed, or insured by

Canada or are otherwise backed or supported by the full faith and credit of

Canada;

(b) However, an insurer shall not acquire an instrument under this subsection if, as a result

of and after giving effect to the investment, the aggregate amount of investments then

held by the insurer under this subsection would exceed forty percent (40%) of its

admitted assets.



(3) (a) Subject to the limitations of subsection (2) of Section 8 of this Act, but not to the

limitations of subsection (1) of Section 8 of this Act, an insurer may acquire rated credit

instruments, excluding asset-backed securities:

1. Issued by a government money market mutual fund, a class one money market

mutual fund, or a class one bond mutual fund;

2. Issued, assumed, guaranteed, or insured by a government sponsored enterprise

of the United States other than those eligible under subsection (1) of this section;

3. Issued, assumed, guaranteed, or insured by a state, if the instruments are

general obligations of the state; or

4. Issued by a multilateral development bank;

(b) However, an insurer shall not acquire an instrument of any one (1) fund, any one (1)

enterprise or entity, or any one (1) state under this subsection if, as a result of and

after giving effect to the investment, the aggregate amount of investments then held

in any one (1) fund, enterprise, entity, or state under this subsection would exceed ten

percent (10%) of its admitted assets.

(4) Subject to the limitations of Section 8 of this Act, an insurer may acquire preferred stocks

that are not foreign investments and that meet the requirements of rated credit instruments

if, as a result of and after giving effect to the investment;

(a) The aggregate amount of preferred stocks then held by the insurer under this

subsection does not exceed twenty percent (20%) of its admitted assets; and

(b) The aggregate amount of preferred stocks then held by the insurer under this

subsection which are not sinking fund stocks or rated P1 or P2 by the SVO does not

exceed ten percent (10%) of its admitted assets.

(5) Subject to the limitations of Section 8 of this Act, in addition to those investments eligible

under subsections (1) to (4) of this section, an insurer may acquire rated credit instruments

that are not foreign investments.

(6) An insurer shall not acquire special rated credit instruments under this section if, as a

result of and after giving effect to the investment, the aggregate amount of special rated

credit instruments then held by the insurer would exceed five percent (5%) of its admitted

assets.


TO READ AS FOLLOWS:

(1) An insurer may acquire investments in investment pools that :

(a) Invest only in:

1. Obligations that are rated 1 or 2 by SVO or have an equivalent of an SVO 1 or

2 rating or, in the absence of a 1 or 2 rating or equivalent rating, the issuer has

outstanding obligations with an SVO 1 or 2 or equivalent rating by a nationally

recognized statistical rating organization recognized by the SVO and have:

a. A remaining maturity of three hundred ninety-seven (397) days or less or

a put that entitles the holder to receive the principal amount of the



obligation which put may be exercised through maturity at specified

intervals not exceeding three hundred ninety-seven (397) days; or

b. A remaining maturity of three (3) years or less and a floating interest rate

that resets no less frequently than quarterly on the basis of a current short-

term index (federal funds, prime rate, treasury bills, London InterBank

Offered Rate (LIBOR), or commercial paper) and is subject to no

maximum limit, if the obligations do not have an interest rate that varies

inversely to market interest rate changes;

2. Government money market mutual funds or class one money market mutual

funds; or

3. Securities lending, repurchase, and reverse repurchase transactions that meet

all the requirements of Section 14 of this Act, except the quantitative limitations

subsection (4) of Section 14 of this Act; or

(b) Invest only in investments that an insurer may acquire under this subtitle, if the

insurer's proportionate interest in the amount invested in these investments does not

exceed the applicable limits of this subtitle.

(2) For an investment in an investment pool to be qualified under this subtitle, the investment

pool shall not:

(a) Acquire securities issued, assumed, guaranteed, or insured by the insurer or an

affiliate of the insurer;

(b) Borrow or incur any indebtedness for borrowed money, except for securities lending

and reverse repurchase transactions that meet the requirements of Section 14 of this

Act, except the quantitative limitations of subsection (4) of Section 14 of this Act; or

(c) Permit the aggregate value of securities then loaned or sold to, purchased from, or

invested in any one (1) business entity under this section to exceed ten percent (10%)

of the total assets of the investment pool.

(3) The limitations of subsection (1) of Section 8 of this Act shall not apply to an insurer's

investment in an investment pool, however an insurer shall not acquire an investment in

an investment pool under this section if, as a result of and after giving effect to the

investment, the aggregate amount of investment then held by the insurer under this section:

(a) In any one (1) investment pool would exceed ten percent (10%) of its admitted assets;

(b) In all investment pools investing in investments permitted under paragraph (b) of

subsection (1) of this section would exceed twenty-five (25%) of its admitted assets; or

(c) In all investment pools would exceed thirty-five percent (35%) of its admitted assets.

(4) For an investment in an investment pool to be qualified under this subtitle, the manager of

the investment pool shall:

(a) Be organized under the laws of the United States or a state and designated as the pool

manager in a pooling agreement;

(b) Be the insurer, an affiliated insurer or a business entity affiliated with the insurer, a

qualified bank, a business entity registered under the Investment Advisors Act of 1940

(15 U.S.C. sec. 80a-1 et seq.), as amended or, in the case of a reciprocal insurer or



interinsurance exchange, its attorney-in-fact, or in the case of a United States branch

of an alien insurer, its United States manager or affiliates or subsidiaries of its United

States manager;

(c) Compile and maintain detailed accounting records setting forth:

1. The cash receipts and disbursements reflecting each

participant's

proportionate investment in the investment pool;

2. A complete description of all underlying assets of the investment pool, including

amount, interest rate, maturity date if any, and other appropriate designations;

and

3. Other records that, on a daily basis, allow third parties to verify each

participant's investment in the investment pool; and

(d) Maintain the assets of the investment pool in one (1) or more accounts, in the name

of or on behalf of the investment pool, under a custody agreement with a qualified

bank. The custody agreement shall:

1. State and recognize the claims and rights of each participant;

2. Acknowledge that the underlying assets of the investment pool are held solely

for the benefit of each participant in proportion to the aggregate amount of its

investments in the investment pool; and

3. Contain an agreement that the underlying assets of the investment pool shall

not be commingled with the general assets of the custodian qualified bank or

any other person.

(5) The pooling agreement for each investment pool shall be in writing and shall provide that:

(a) An insurer and its affiliated insurers or, in the case of an investment pool investing

solely in investments permitted under paragraph (a) of subsection (1) of this section,

the insurer and its subsidiaries, affiliates, or any pension or profit sharing plan of the

insurer, its subsidiaries and affiliates or, in the case of a United States branch of an

alien insurer, affiliates or subsidiaries of its United States manager, shall at all times,

hold one hundred percent (100%) of the interest in the investment pool;

(b) The underlying assets of the investment pool shall not be commingled with the general

assets of the pool manager or any other person;

(c) In proportion to the aggregate amount of each pool participant's interest in the

investment pool:

1. Each participant owns an undivided interest in the underlying assets of the

investment pool; and

2. The underlying assets of the investment pool are held solely for the benefit of

each participant;

(d) A participant, or in the event of the participant's insolvency, bankruptcy, or

receivership, its trustee, receiver, or other successor-in-interest, may withdraw all or

any portion of its investment from the investment pool under the terms of the pooling

agreement;



(e) Withdrawals may be made on demand without penalty or other assessment on any

business day, but settlement of funds shall occur within a reasonable and customary

period thereafter not to exceed five (5) business days. Distributions under this

paragraph shall be calculated in each case net of all then applicable fees and expenses

of the investment pool. The pooling agreement shall provide that the pool manager

shall distribute to a participant, at the discretion of the pool manager:

1. In cash, the then fair market value of the participant's pro rata share of each

underlying asset of the investment pool;

2. In kind, a pro rata share of each underlying asset; or

3. In a combination of cash and in-kind distributions, a pro rata share in each

underlying asset; and

(f) The pool manager shall make the records of the investment pool available for

inspection by the commissioner.


TO READ AS FOLLOWS:

(1) Subject to the limitations of Section 8 of this Act, an insurer may acquire equity interests

in business entities organized under the laws of any domestic jurisdiction.

(2) An insurer shall not acquire an investment under this section if, as a result of and after

giving effect to the investment, the aggregate amount of investment then held by the insurer

under this section would exceed twenty percent (20%) of its admitted assets, or the amount

of equity interests then held by the insurer that are not listed on a qualified exchange would

exceed five percent (5%) of its admitted assets. An accident and health insurer shall not be

subject to this section but shall be subject to the same aggregate limitation on equity

interests as a property and casualty insurer under Section 24 of this Act and also to the

provisions of Section 20 of this Act.

(3) An insurer shall not acquire under this section any investment that the insurer may acquire

under Section 13 of this Act.

(4) An insurer shall not short sell equity investments unless the insurer covers the short sale

by owning the equity investment or an unrestricted right to the equity instrument

exercisable within six (6) months of the short sale.


TO READ AS FOLLOWS:

(1) (a) Subject to the limitations of Section 8 of this Act, an insurer may acquire tangible

personal property or equity interests therein located or used wholly or in part within a

domestic jurisdiction either directly or indirectly through limited partnership interests and

general partnership interests not otherwise prohibited by subsection (4) of Section 4 of this

Act, joint ventures, stock of an investment subsidiary or membership interests in a limited

liability company, trust certificates, or other similar instruments.

(b) Investments acquired under paragraph (a) of this subsection shall be eligible only if:

1. The property is subject to a lease or other agreement with a person whose rated

credit instruments in the amount of the purchase price of the personal property

the insurer could then acquire under Section 9 of this Act; and



2. The lease or other agreement provides the insurer the right to receive rental,

purchase, or other fixed payments for the use or purchase of the property, and

the aggregate value of the payments, together with the estimated residual value

of the property at the end of its useful life and the estimated tax benefits to the

insurer resulting from ownership of the property, shall be adequate to return

the cost of the insurer's investment in the property, plus a return deemed

adequate by the insurer.

(2) The insurer shall compute the amount of each investment under this section on the basis

of the out-of-pocket purchase price and applicable related expenses paid by the insurer for

the investment, net of each borrowing made to finance the purchase price and expenses, to

the extent the borrowing is without recourse to the insurer.


giving effect to the investment, the aggregate amount of all investments then held by the

insurer under this section would exceed; (a) Two percent (2%) of its admitted assets; or

(b) One-half of one percent (0.5%) of its admitted assets as to any single item of tangible

personal property.

(4) For purposes of determining compliance with the limitations of Section 8 of this Act,

investments acquired by an insurer under this section shall be aggregated with those

acquired under Section 9 of this Act, and each lessee of the property under a lease referred

to in this section shall be the issuer of an obligation in the amount of the investment of the

insurer in the property determined as provided in subsection (2) of this section.

(5) Nothing in this section is applicable to tangible personal property lease arrangements

between an insurer and its subsidiaries and affiliates under a cost sharing arrangement or

agreement permitted under KRS 304.37-030.


TO READ AS FOLLOWS:

(1) (a) Subject to the limitations of Section 8 of this Act, an insurer may acquire, either directly

or indirectly through limited partnership interests and general partnership interests

not otherwise prohibited by subsection (4) Section 4 of this Act, joint ventures, stock

of an investment subsidiary or membership interests in a limited liability company,

trust certificates, or other similar instruments, obligations secured by mortgages on

real estate situated within a domestic jurisdiction, but a mortgage loan that is secured

by other than a first lien shall not be acquired unless the insurer is the holder of the

first lien. The obligations held by the insurer and any obligations with an equal lien

priority, shall not, at the time of acquisition of the obligation, exceed:

1. Ninety percent (90%) of the fair market value of the real estate, if the mortgage

loan is secured by a purchase money mortgage or like security received by the

insurer upon disposition of the real estate;

2. Eighty percent (80%) of the fair market value of the real estate, if the mortgage

loan requires immediate scheduled payment in periodic installments of

principal and interest, has an amortization period of thirty (30) years or less,

and periodic payments made no less frequently than annually. Each periodic

payment shall be sufficient to assure that at all times the outstanding principal

balance of the mortgage loan shall be no greater than the outstanding principal



balance that would be outstanding under a mortgage loan with the same

original principal balance, with the same interest rate, and requiring equal

payments of principal and interest with the same frequency over the same

amortization period. Mortgage loans permitted under this subsection are

permitted notwithstanding the fact that they provide for a payment of the

principal balance prior to the end of the period of amortization of the loan. For

residential mortgage loans, the eighty percent (80%) limitation may be increased

to ninety-seven percent (97%) if acceptable private mortgage insurance has

been obtained; or

3. Seventy-five percent (75%) of the fair market value of the real estate for

mortgage loans that do not meet the requirements of subparagraph 1. or 2. of

this paragraph.

(b) For purposes of paragraph (a) of this subsection, the amount of an obligation

required to be included in the calculation of the loan-to-value ratio may be reduced

to the extent the obligation is insured by the Federal Housing Administration,

guaranteed by the Administrator of Veteran Affairs, or their successors.

(c) A mortgage loan that is held by an insurer under subsection (7) of Section 2 of this

Act or acquired under this section and is restructured in a manner that meets the

requirements of a restructured mortgage loan in accordance with the NAIC

Accounting Practices and Procedures Manual or successor publication shall continue

to qualify as a mortgage loan under this subtitle.

(d) Subject to the limitations of Section 8 of this Act, credit lease transactions that do not

qualify for investment under Section 9 of this Act with the following characteristics

shall be exempt from the provisions of paragraph (a) of this subsection :

1. The loan amortizes over the initial fixed lease term at least in an amount

sufficient so that the loan balance at the end of the lease term does not exceed

the original appraised value of the real estate;

2. The lease payments cover or exceed the total debt service over the life of the

loan;

3. A tenant or its affiliated entity whose rated credit instruments have a SVO 1 or

2 designation or a comparable rating from a nationally recognized statistical

rating organization recognized by the SVO has a full faith and credit obligation

to make the lease payments;

4. The insurer holds or is the beneficial holder of a first lien mortgage on the real

estate;

5. The expenses of the real estate are passed through to the tenant, excluding

exterior, structural, parking, and heating, ventilation, and air conditioning

replacement expenses, unless annual escrow contributions, from cash flows

derived from the lease payments, cover the expense shortfall; and

6. There is a perfected assignment of the rents due in accordance with the lease to

or for the benefit of the insurer.



(2) (a) An insurer may acquire, manage, and dispose of real estate situated in a domestic

jurisdiction either directly or indirectly through limited partnership interests and

general partnership interests not otherwise prohibited by subsection (4) of Section 4

of this Act, joint ventures, stock of an investment subsidiary or membership interests

in a limited liability company, trust certificates, or other similar instruments. The real

estate shall be income producing or intended for improvement or development for

investment purposes under an existing program in which case the real estate shall be

deemed to be income producing.

(b) The real estate may be subject to mortgages, liens, or other encumbrances, the

amount of which shall, to the extent that the obligations secured by the mortgages,

liens, or encumbrances are without recourse to the insurer, be deducted from the

amount of the investment of the insurer in the real estate for purposes of determining

compliance with paragraphs (b) and (c) of subsection (4) of this section.

(3) (a) An insurer may acquire, manage, and dispose of real estate for the convenient

accommodation of the insurer's, which may include its affiliates, business operations,

including home office, branch office, and field office operations:

1. Real estate acquired under this subsection may include excess space for rent to

others, if the excess space, valued at its fair market value, would otherwise be a

permitted investment under subsection (2) of this section and is so qualified by

the insurer;

2. The real estate acquired under this subsection may be subject to one (1) or more

mortgages, liens, or other encumbrances, the amount of which shall, to the

extent that the obligations secured by the mortgages, liens, or encumbrances are

without recourse to the insurer, be deducted from the amount of the investment

of the insurer in the real estate for purposes of determining compliance with

paragraph (d) of subsection (4) of this section; and

3. For purposes of this subsection, "business operations" shall not include that

portion of real estate used for the direct provision of health care services by an

accident and health insurer or its insured. An insurer may acquire real estate

used for these purposes under subsection (2) of this section.

(4) (a) An insurer shall not acquire an investment under subsection (1) of this section if, as

a result of and after giving effect to the investment, the aggregate amount of all

investments then held by the insurer under subsection (1) of this section would

exceed;

1. One percent (1%) of its admitted assets in mortgage loans covering any one (1)

secured location;

2. One-quarter of one percent (0.25%) of its admitted assets in construction loans

covering any one (1) secured location; or

3. Two percent (2%) of its admitted assets in construction loans in the aggregate.

(b) An insurer shall not acquire an investment under subsection (2) of this section if, as

a result of and after giving effect to the investment and any outstanding guarantees

made by the insurer in connection with the investment, the aggregate amount of



investments then held by the insurer under subsection (2) of this section plus the

guarantees then outstanding would exceed:

1. One percent (1%) of its admitted assets in one (1) parcel or group of contiguous

parcels of real estate, except that this limitation shall not apply to that portion

of real estate used for the direct provision of health care services by an accident

and health insurer for its insureds, such as hospitals, medical clinics, medical

professional buildings, or other health facilities used for the purpose of

providing health services; or

2. Fifteen percent (15%) of its admitted assets in the aggregate, but not more than

five percent (5%) of its admitted assets as to properties that are to be improved

or developed.

(c) An insurer shall not acquire an investment under subsection (1) or (2) of this section

if, as a result of and after giving effect to the investment and any guarantees made by

the insurer in connection with the investment, the aggregate amount of all

investments then held by the insurer under subsections (1) and (2) of this section plus

the guarantees then outstanding would exceed forty-five percent (45%) of its admitted

assets. However, an insurer may exceed this limitation by no more than thirty percent

(30%) of its admitted assets if:

1. This increased amount is invested only in residential mortgage loans;

2. The insurer has no more than ten percent (10%) of its admitted assets invested

in mortgage loans other than residential mortgage loans;

3. The loan-to-value ratio of each residential mortgage loan does not exceed sixty

percent (60%) at the time the mortgage loan is qualified under this increased

authority, and the fair market value is supported by an appraisal no more than

two (2) years old, prepared by an independent appraiser;

4. A single mortgage loan qualified under this increased authority shall not exceed

one-half of one percent (0.5%) of its admitted assets;

5. The insurer files with the commissioner, and receives approval from the

commissioner for, a plan that is designed to result in a portfolio of residential

mortgage loans that is sufficiently geographically diversified; and

6. The insurer agrees to file annually with the commissioner records that

demonstrate that its portfolio of residential mortgage loans is geographically

diversified in accordance with the plan.

(d) The limitations of Section 8 of this Act shall not apply to an insurer's acquisition of

real estate under subsection (3) of this section. An insurer shall not acquire real estate

under subsection (3) of this section if, as a result of and after giving effect to the

acquisition, the aggregate amount of real estate then held by the insurer under

subsection (3) of this section would exceed ten percent (10%) of its admitted assets.

With the permission of the commissioner, additional amounts of real estate may be

acquired under subsection (3) of this section.


TO READ AS FOLLOWS:



An insurer may enter into securities lending, repurchase, reverse repurchase, and dollar roll

transactions with business entities, subject to the following requirements:

(1) The insurer's board of directors shall adopt a written plan that is consistent with the

requirements of the written plan in Section 3 of this Act that specifies guidelines and

objectives to be followed, such as:

(a) A description of how cash received will be invested or used for general corporate

purposes of the insurer;

(b) Operational procedures to manage interest rate risk, counterparty default risk, the

conditions under which proceeds from reverse repurchase transactions may be used

in the ordinary course of business, and the use of acceptable collateral in a manner

that reflects the liquidity needs of the transactions; and

(c) The extent to which the insurer may engage in these transactions.

(2) The insurer shall enter into a written agreement for all transactions authorized in this

section other than dollar roll transactions. The written agreement shall require that each

transaction terminate not more than one (1) year from its inception or upon the earlier

demand of the insurer. The agreement shall be with the business entity counterparty, but

for securities lending transactions, the agreement may be with an agent acting on behalf

of the insurer, if the agent is a qualified business entity, and if the agreement:

(a) Requires the agent to enter into separate agreements with each counterparty that are

consistent with the requirements of this section; and

(b) Prohibits securities lending transactions under the agreement with the agent or its

affiliates.

(3) Cash received in a transaction under this section shall be invested in accordance with this

subtitle and in a manner that recognizes the liquidity needs of the transaction or used by

the insurer for its general corporate purposes. For so long as the transaction remains

outstanding, the insurer, its agent, or its custodian shall maintain, as to acceptable

collateral received in a transaction under this section, either physically or through the book

entry systems of the Federal Reserve, Depository Trust Company, Participants Trust

Company, or other securities depositories approved by the commissioner:

(a) Possession of the acceptable collateral;

(b) A perfected security interest in the acceptable collateral; or

(c) In the case of a jurisdiction outside of the United States, title to, or rights of a secured

creditor to, the acceptable collateral.

(4) The limitations of Sections 8 and 15 of this Act shall not apply to the business entity

counterparty exposure created by transactions under this section. For purposes of

calculations made to determine compliance with this subsection, no effect will be given to

the insurer's future obligation to resell securities, in the case of a repurchase transaction,

or to repurchase securities, in the case of a reverse repurchase transaction. An insurer shall

not enter into a transaction under this section if, as a result of and after giving effect to the

transaction:

(a) The aggregate amount of securities then loaned, sold to, or purchased from any one

(1) business entity counterparty under this section would exceed five percent (5%) of



its admitted assets. In calculating the amount sold to or purchased from a business

entity counterparty under repurchase or reverse repurchase transactions, effect may

be given to netting provisions under a master written agreement; or

(b) The aggregate amount of all securities then loaned, sold to, or purchased from all

business entities under this section would exceed forty percent (40%) of its admitted

assets.

(5) In a securities lending transaction, the insurer shall receive acceptable collateral having a

market value as of the transaction date at least equal to one hundred two percent (102%)

of the market value of the securities loaned by the insurer in the transaction as of that date.

If at any time the market value of the acceptable collateral is less than the market value of

the loaned securities, the business entity counterparty shall be obligated to deliver

additional acceptable collateral, the market value of which, together with the market value

of all acceptable collateral then held in connection with the transaction, at least equals one

hundred two percent (102%) of the market value of the loaned securities.

(6) In a reverse repurchase transaction, other than a dollar roll transaction, the insurer shall

receive acceptable collateral having a market value as of the transaction date at least equal

to ninety-five percent (95%) of the market value of the securities transferred by the insurer

in the transaction as of that date. If at any time the market value of the acceptable collateral

is less than ninety-five percent (95%) of the market value of the securities so transferred,

the business entity counterparty shall be obligated to deliver additional acceptable

collateral, the market value of which, together with the market value of all acceptable

collateral then held in connection with the transaction, at least equals ninetyfive percent

(95%) of the market value of the transferred securities.

(7) In a dollar roll transaction, the insurer shall receive cash in an amount at least equal to

the market value of the securities transferred by the insurer in the transaction as of the

transaction date.

(8) In a repurchase transaction, the insurer shall receive as acceptable collateral transferred

securities having a market value at least equal to one hundred two percent (102%) of the

purchase price paid by the insurer for the securities. If at any time the market value of the

acceptable collateral is less than one hundred percent (100%) of the purchase price paid by

the insurer, the business entity counterparty shall be obligated to provide additional

acceptable collateral. the market value of which, together with the market value of all

acceptable collateral then held in connection with the transaction, at least equals one

hundred two percent (102%) of the purchase price. Securities acquired by an insurer in a

repurchase transaction shall not be sold in a reverse repurchase transaction, loaned in a

securities lending transaction, or otherwise pledged.


TO READ AS FOLLOWS:

(1) Subject to the limitations of Section 8 of this Act, an insurer may acquire foreign

investments, or engage in investment practices with persons of or in foreign jurisdictions,

of substantially the same types as those that an insurer is permitted to acquire under this

subtitle, other than of the type permitted under Section 10 of this Act, if, as a result of and

after giving effect to the investment:



(a) The aggregate amount of foreign investments then held by the insurer under this


(b) The aggregate amount of foreign investments then held by the insurer under this

subsection in a single foreign jurisdiction does not exceed ten percent (10%) of its

admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1

or three percent (3%) of its admitted assets as to any other foreign jurisdiction.

(2) Subject to the limitations of Section 8 of this Act, an insurer may acquire investments, or

engage in investment practices denominated in foreign currencies, whether or not they are

foreign investments acquired under subsection (1) of this section, or additional foreign

currency exposure as a result of the termination or expiration of a hedging transaction with

respect to investments denominated in a foreign currency, if:

(a) The aggregate amount of investments then held by the insurer under this subsection

denominated in foreign currencies does not exceed ten percent (10%) of its admitted

assets; and

(b) The aggregate amount of investments then held by the insurer under this subsection

denominated in the foreign currency of a single foreign jurisdiction does not exceed

ten percent (10%) of its admitted assets as to a foreign jurisdiction that has a sovereign

debt rating of SVO 1 or three percent (3%) of its admitted assets as to any other foreign

jurisdiction;

(c) However, an investment shall not be considered denominated in a foreign currency if

the acquiring insurer enters into one (1) or more contracts in transactions permitted

under Section 16 of this Act and the business entity counterparty agrees under the

contract or contracts to exchange all payments made on the foreign currency

denominated investment for United States currency at a rate that effectively insulates

the investment cash flows against future changes in currency exchange rates during

the period the contract or contracts are in effect.

(3) In addition to investments permitted under subsections (1) and (2) of this section, an insurer

that is authorized to do business in a foreign jurisdiction, and that has outstanding

insurance, annuity, or reinsurance contracts on lives or risks resident or located in that

foreign jurisdiction and denominated in foreign currency of that jurisdiction, may acquire

foreign investment respecting that foreign jurisdiction, and may acquire investments

denominated in the currency of that jurisdiction, subject to the limitations of Section 8 of

this Act. However, investments made under this subsection in obligations of foreign

governments, their political subdivisions, and government sponsored enterprises shall not

be subject to the limitations of Section 10 of this Act if those investments carry an SVO

rating of 1 or 2. The aggregate amount of investments acquired by the insurer under this

subsection shall not exceed the greater of:

(a) The amount the insurer is required by the law of the foreign jurisdiction to invest in

the foreign jurisdiction; or

(b) One hundred fifteen percent (115%) of the amount of its reserves, net of reinsurance,

and other obligations under the contracts on lives or risks resident or located in the

foreign jurisdiction.


that is not authorized to do business in a foreign jurisdiction, but that has outstanding



insurance, annuity, or reinsurance contracts on lives or risks resident or located in that


foreign investments respecting that foreign jurisdiction, and may acquire investments

denominated in the currency of that jurisdiction subject to the limitations of Section 8 of

this Act. However, investments made under this subsection in obligations of foreign

governments, their political subdivisions, and government sponsored enterprises shall not

be subject to the limitations of Section 8 of this Act if those investments carry an SVO rating

of 1 or 2. The aggregate amount of investments acquired by the insurer under this

subsection shall not exceed one hundred five percent (105%) of the amount of its reserves,

net of reinsurance, and other obligations under the contracts on lives or risks resident or

located in the foreign jurisdiction.

(5) Investments acquired under this section shall be aggregated with investments of the same

types made in accordance with this subtitle, and in a similar manner, for purposes of

determining compliance with the limitations, if any, contained in this subtitle. Investments

in obligations of foreign governments, their political subdivisions, and government

sponsored enterprises of these persons, except for those exempted under subsections (3)

and (4) of this section, shall be subject to the limitations of Section 8 of this Act.


TO READ AS FOLLOWS:

An insurer may, directly or indirectly through an investment subsidiary, engage in derivative

transactions under this section under the following conditions:

(1) (a) An insurer may use derivative instruments under this section to engage in hedging

transactions and certain income generation transactions, as these terms may be further

defined in regulations promulgated by the commissioner; and

(b) An insurer shall be able to demonstrate to the commissioner the intended hedging

characteristics and the ongoing effectiveness of the derivative transaction or

combination of the transactions through cash flow testing or other appropriate

analyses.

(2) An insurer may enter into hedging transactions under this section if, as a result of and after

giving effect to the transaction:

(a) The aggregate statement value of options, caps, floors, and warrants not attached to

another financial instrument purchased and used in hedging transactions does not

exceed seven and one-half percent (7.5%) of its admitted assets;

(b) The aggregate statement value of options, caps, and floors written in hedging

transactions does not exceed three percent (3%) of its admitted assets; and

(c) The aggregate potential exposure of collars, swaps, forwards, and futures used in

hedging transactions does not exceed six and one-half percent (6.5%) of its admitted

assets.

(3) An insurer may only enter into the following types of income generation transactions if, as

a result of and after giving effect to the transactions, the aggregate statement value of the

fixed income assets that are subject to call or that generate the cash flows for payments

under the caps or floors, plus the face value of fixed income securities underlying a



derivative instrument subject to call, plus the amount of the purchase obligations under the

puts, does not exceed ten percent (10%) of its admitted assets:

(a) Sales of covered call options on noncallable fixed income securities, callable fixed

income securities if the option expires by its terms prior to the end of the noncallable

period, or derivative instruments based on fixed income securities;

(b) Sales of covered call options on equity securities, if the insurer holds in its portfolio,

or can immediately acquire through the exercise of options, warrants, or conversion

rights already owned, the equity securities subject to call during the complete term of

the call options sold;

(c) Sales of covered puts on investments that the insurer is permitted to acquire under

this subtitle, if the insurer has escrowed or entered into a custodian agreement

segregating cash or cash equivalents with a market value equal to the amount of its

purchase obligations under the put during the complete term of the put option sold;

or

(d) Sales of covered caps or floors, if the insurer holds in its portfolio the investments

generating the cash flow to make the required payments under the caps or floors

during the complete term that the cap or floor is outstanding.

(4) An insurer shall include all counterparty exposure amounts in determining compliance

with the limitations of Section 8 of this Act.

(5) In accordance with administrative regulations promulgated under Section 6 of this Act, the

commissioner may approve additional transactions involving the use of derivative

instruments in excess of the limits of subsection (2) of this section or for other risk

management purposes under administrative regulations promulgated by the commissioner,

but replication transactions shall not be permitted for other than risk management

purposes.


TO READ AS FOLLOWS:

A life insurer may lend to a policyholder on the security of the cash surrender value of the

policyholder's policy a sum not exceeding the legal reserve that the insurer is required to

maintain on the policy.


TO READ AS FOLLOWS:

(1) Solely for the purpose of acquiring investments that exceed the quantitative limitations of

Sections 8 to 15 of this Act, an insurer may acquire under this subsection an investment,

or engage in investment practices described in Section 14 of this Act, but an insurer shall

not acquire an investment, or engage in investment practices described in Section 14 of this

Act, under this subsection if, as a result of and after giving effect to the transaction:

(a) The aggregate amount of investments then held by an insurer under this subsection

would exceed three percent (3%) of its admitted assets; or

(b) The aggregate amount of investments as to one (1) limitation in Sections 8 to 15 of

this Act then held by the insurer under this subsection would exceed one percent (1%)

of its admitted assets.



(2) (a) In addition to the authority provided under subsection (1) of this section, an insurer

may acquire under this subsection an investment of any kind, or engage in investment

practices described in Section 14 of this Act, that are not specifically prohibited by this

subtitle, without regard to the categories, conditions, standards, or

other limitations of Sections 8 to 15 of this Act if, as a result of and after giving effect

to the transaction, the aggregate amount of investments then held under this

subsection would not exceed the lesser of:

1. Ten percent (10%) of its admitted assets; or

2. Seventy-five percent (75%) of its capital and surplus.

(b) However, an insurer shall not acquire any investment or engage in any investment

practice under this subsection if, as a result of and after giving effect to the

transaction, the aggregate amount of all investments in any one (1) person then held

by the insurer under this subsection would exceed three percent (3%) of its admitted

assets.

(3) In addition to the investments acquired under subsections (1) and (2) of this section, an

insurer may acquire under this subsection an investment of any kind, or engage in

investment practices described in Section 14 of this Act, that are not specifically prohibited

by this subtitle without regard to any limitations of Sections 8 to 15 of this Act if:

(a) The commissioner grants prior approval;

(b) The insurer demonstrates that its investments are being made in a prudent manner

and that the additional amounts will be invested in a prudent manner; and

(c) As a result of and after giving effect to the transaction, the aggregate amount of

investments then held by the insurer under this subsection does not exceed the greater

of:

1. Twenty-five percent (25%) of its capital and surplus; or

2. One hundred percent (100%) of capital and surplus less ten percent (10%) of its

admitted assets.

(4) An investment prohibited under Section 4 of this Act, not permitted under Section 16 of this

Act, or additional derivative instruments acquired under Section 16 of this Act shall not be

acquired under this section.


TO READ AS FOLLOWS:

Sections 19 to 30 of this Act shall apply to the investments and investment practices of domestic

property and casualty, title, financial guaranty, and mortgage guaranty insurers, of domestic

insurers and United States branches of alien property and casualty, financial guaranty, and

mortgage guaranty insurers entered through this state.


TO READ AS FOLLOWS:

(1) Subject to all other limitations and requirements of this subtitle, a property and casualty,

financial guaranty, mortgage guaranty, or accident and health insurer shall maintain an

amount at least equal to one hundred percent (100%) of adjusted loss reserves and loss



adjustment expense reserves, one hundred percent (100%) of adjusted unearned premium

reserves, and one hundred percent (100%) of statutorily required policy and contract

reserves in :

(a) Cash and cash equivalents;

(b) High and medium grade investments that qualify under Section 22 or 23 of this Act;

(c) Equity interests that qualify under Section 24 of this Act and that are traded on a

qualified exchange;

(d) Investments of the type set forth in Section 28 of this Act, if the investments are rated

in the highest generic rating category by a nationally recognized statistical rating

organization recognized by the SVO for rating foreign jurisdictions and if any foreign

currency exposure is effectively hedged through the maturity date of the investments;

(e) Qualifying investments of the type set forth in paragraph (b), (c), or (d) of this

subsection that are acquired under Section 30 of this Act;

(f) Interest and dividends receivable on qualifying investments of the type set forth in

paragraphs (a) to (e) of this subsection; or (g) Reinsurance recoverable on paid losses.

(2) Determination of the reserve requirement amount shall be as follows:

(a) For purposes of determining the amount of assets to be maintained under this

subsection, the calculation of adjusted loss reserves and loss adjustment expense

reserves, adjusted unearned premium reserves, and statutorily required policy and

contract reserves shall be based on the amounts reported as of the most recent annual

or quarterly statement date;

(b) Adjusted loss reserves and loss adjustment expense reserves shall be equal to the sum

of the amounts derived from the following calculations:

1. The result of each amount reported by the insurer as losses and loss adjustment

expenses unpaid for each accident year for each individual line of business;

multiplied by

2. The discount factor that is applicable to the line of business and accident year

published by the Internal Revenue Service under Internal Revenue Code

Section 846 (26 U.S.C. sec. 846), as amended, for the calendar year that

corresponds to the most recent annual statement of the insurer; minus

3. Accrued retrospective premiums discounted by an average discount factor. The

discount factor shall be calculated by dividing the losses and loss adjustment

expenses unpaid after discounting (the product of subparagraphs 1. and 2. of

this paragraph) by loss and loss adjustment expense reserves before discounting

subparagraph 1. of this paragraph; and

4. For purposes of these calculations, the losses and loss adjustment expenses

unpaid shall be determined net of anticipated salvage and subrogation, and

gross of any discount for the time value of money or tabular discount.

(c) Adjusted unearned premium reserves shall be equal to the result of the following

calculation:

1. The amount reported by the insurer as unearned premium reserves; minus



2. The admitted asset amounts reported by the insurer as:

a. Premiums in and agents' balances in the course of collection, accident and

health premiums due and unpaid, and uncollected premiums for accident

and health premiums;

b. Premiums, agents' balances, and installments booked but deferred and not

yet due; and

c. Bills receivable, taken for premium.

(d) Statutorily required policy and contract reserves also shall include, in the case of a

title insurer, the amounts required by KRS 304.6-080 and, in the case of a mortgage

guaranty insurer, the amounts required by KRS 304.6-090 and, in the case of an

accident and health insurer, the amounts required by KRS 304.6-070.

(3) A property and casualty, financial guaranty, mortgage guaranty, or accident and health

insurer shall supplement its annual statement with a reconciliation and summary of its

assets and reserve requirements as required in subsection (1) of this section. A

reconciliation and summary showing that an insurer's assets as required in subsection (1)

of this section are greater than or equal to its undiscounted reserves referred to in

subsection (1) of this section shall be sufficient to satisfy this requirement. Upon prior

notification, the commissioner may require an insurer to submit a reconciliation and

summary with any quarterly statement filed during the calendar year.

(4) If a property and casualty, financial guaranty, mortgage guaranty, or accident and health

insurer's assets and reserves do not comply with subsection (1) of this section, the insurer

shall notify the commissioner immediately of the amount by which the reserve requirements

exceed the annual statement value of the qualifying assets, explain why the deficiency

exists, and within thirty (30) days of the date of the notice propose a plan of action to remedy

the deficiency.

(5) If the commissioner determines that an insurer is not in compliance with subsection (1) of

this section, the commissioner shall require the insurer to eliminate the condition causing

the noncompliance within a specified time from the date the notice of the commissioner's

requirement is mailed or delivered to the insurer.

(6) If an insurer fails to comply with the commissioner's requirement under subsection (5) of

this section, the insurer is deemed to be in hazardous financial condition, and the

commissioner shall take one (1) or more of the actions authorized by Subtitle 33 of KRS

Chapter 304, and KRS 304.3-200.


TO READ AS FOLLOWS:

(1) Except as otherwise specified in this subtitle, an insurer shall not acquire directly or

indirectly through an investment subsidiary an investment under this subtitle if, as a result

of and after giving effect to the investment, the insurer would hold more than five percent

(5%) of its admitted assets in investments of all kinds issued, assumed, accepted, insured,

or guaranteed by a single person.

(2) This five percent (5%) limitation shall not apply to the aggregate amounts insured by a

single financial guaranty insurer with the highest generic rating issued by a nationally

recognized statistical rating organization.



(3) Asset-backed securities shall not be subject to the limitations of subsection (1) of this

section. However, an insurer shall not acquire an asset-backed security if, as a result of

and after giving effect to the investment, the aggregate amount of asset-backed securities

secured by or evidencing an interest in a single asset or single pool of assets held by a trust

or other business entity, then held by the insurer would exceed five percent (5%) of its

admitted assets.

(4) An insurer shall not acquire, directly or indirectly through an investment subsidiary, an

investment under Section 22, 25, or 28 of this Act, or counterparty exposure under

subsection (4) of Section 29 of this Act if, as a result of and after giving effect to the

investment:

(a) The aggregate amount of all medium and lower grade investments then held by the

insurer would exceed twenty percent (20%) of its admitted assets;

(b) The aggregate amount of lower grade investments then held by the insurer would

exceed ten percent (10%) of its admitted assets;

(c) The aggregate amount of investments rated 5 or 6 by the SVO then held by the insurer

would exceed five percent (5%) of its admitted assets;

(d) The aggregate amount of investments rated 6 by the SVO then held by the insurer

would exceed one percent (1%) of its admitted assets; or

(e) The aggregate amount of medium and lower grade investments then held by the

insurer that receive as cash income less than the equivalent yield for Treasury issues

with a comparative average life, would exceed one percent (1%) of its admitted assets.

(5) An insurer shall not acquire, directly or indirectly through an investment subsidiary, an

investment under Section 22, 25, or 28 of this Act, or counterparty exposure under

subsection (4) of Section 29 of this Act if, as a result of and after giving effect to the

investment:

(a) The aggregate amount of medium and lower grade investments issued, assumed,

guaranteed, accepted, or insured by any one (1) person or, as to asset-backed

securities secured by or evidencing an interest in a single asset or pool of assets, then

held by the insurer would exceed one percent (1%) of its admitted assets; or

(b) The aggregate amount of lower grade investments issued, assumed, guaranteed,

accepted, or insured by any one (1) person or, as to asset-backed securities secured by

or evidencing an interest in a single asset or pool of assets, then held by the insurer

would exceed one-half of one percent (0.5%) of its admitted assets.

(6) If an insurer attains or exceeds the limit of any one (1) rating category referred to in

subsections (4) to (6) of this section, the insurer shall not thereby be precluded from

acquiring investments in other rating categories subject to the specific and multicategory

limits applicable to those investments.

(7) An insurer shall not acquire, directly or indirectly through an investment subsidiary, any

Canadian investments authorized by this subtitle, if as a result of and after giving effect to

the investment, the aggregate amount of these investments then held by the insurer would

exceed forty percent (40%) of its admitted assets, or if the aggregate amount of Canadian

investments not acquired under subsection (2) of Section 22 of this Act then held by the

insurer would exceed twenty-five percent (25%) of its admitted assets.



(8) However, as to an insurer that is authorized to do business in Canada or that has

outstanding insurance, annuity, or reinsurance contracts on lives or risks resident or

located in Canada and denominated in Canadian currency, the limitations of subsection

(7) of this section shall be increased by the greater of:

(a) The amount the insurer is required by Canadian law to invest in Canada or to be

denominated in Canadian currency; or

(b) One hundred twenty-five percent (125%) of the amount of its reserves and other

obligations under contracts on risks resident or located in Canada.


TO READ AS FOLLOWS:

(1) Subject to the limitations of subsections (4) to (6) of Section 21 of this Act, but not to the

limitations of subsections (1) to (3) of Section 21 of this Act, an insurer may acquire rated

credit instruments issued, assumed, guaranteed, or insured by:

(a) The United States; or

(b) A government sponsored enterprise of the United States, if the instruments of the

government sponsored enterprise are assumed, guaranteed, or insured by the United

States or are otherwise backed or supported by the full faith and credit of the United

States.

(2) (a) Subject to the limitations of subsections (4) to (6) of Section 21 of this Act, but not to

the limitations of subsections (1) to (3) of Section 21 of this Act, an insurer may acquire

rated credit instruments issued, assumed, guaranteed, or insured by:

1. Canada; or

2. A government sponsored enterprise of Canada, if the instruments of the

government sponsored enterprise are assumed, guaranteed, or insured by

Canada or are otherwise backed or supported by the full faith and credit of

Canada;

(b) However, an insurer shall not acquire an instrument under this subsection if, as a result

of and after giving effect to the investment, the aggregate amount of investments then

held by the insurer under this subsection would exceed forty percent (40%) of its

admitted assets.

(3) (a) Subject to the limitations of subsections (4) to (6) of Section 21 of this Act, but not to

the limitations of subsections (1) to (3) of Section 21 of this Act, an insurer may acquire

rated credit instruments, excluding asset-backed securities:

1. Issued by a government money market mutual fund, a class one money market

mutual fund, or a class one bond mutual fund;

2. Issued, assumed, guaranteed, or insured by a government sponsored enterprise

of the United States other than those eligible under subsection (1) of this section;

3. Issued, assumed, guaranteed, or insured by a state, if the instruments are

general obligations of the state; or

4. Issued by a multilateral development bank;



(b) However, an insurer shall not acquire an instrument of any one (1) fund, any one (1)

enterprise or entity, or any one (1) state under this subsection if, as a result of and

after giving effect to the investment, the aggregate amount of investments then

held in any one (1) fund enterprise or entity, or state under this subsection would


(4) Subject to the limitations of Section 21 of this Act, an insurer may acquire preferred stocks

that are not foreign investments and that meet the requirements of rated credit instruments

if, as a result of and after giving effect to the investment:

(a) The aggregate amount of preferred stocks then held by the insurer under this


(b) The aggregate amount of preferred stocks then held by the insurer under this

subsection that are not sinking fund stocks or rated P1 or P2 by the SVO does not


(5) Subject to the limitations of Section 21 of this Act, in addition to those investments eligible

under subsections (1) to (4) of this section, an insurer may acquire rated credit instruments

that are not foreign investments.

(6) An insurer shall not acquire special rated credit instruments under this section if, as a

result of and after giving effect to the investment, the aggregate amount of special rated

credit instruments then held by the insurer would exceed five percent (5%) of its admitted

assets.


TO READ AS FOLLOWS:

(1) An insurer may acquire investments in investment pools that:

(a) Invest only in:

1. Obligations that are rated 1 or 2 by the SVO or have an equivalent of an SVO 1

or 2 rating or, in the absence of a 1 or 2 rating or equivalent rating, the issuer

has outstanding obligations with an SVO 1 or 2 equivalent rating by a nationally

recognized statistical rating organization recognized by the SVO and have:

a. A remaining maturity of three hundred ninety-seven (397) days or less or

a put that entitles the holder to receive the principal amount of the

obligation which put may be exercised through maturity at specified

intervals not exceeding three hundred ninety-seven (397) days; or

b. A remaining maturity of three (3) years or less and a floating interest rate

that resets no less frequently than quarterly on the basis of a current short-

term index (federal funds, prime rate, treasury bills. London InterBank

Offered Rate (LIBOR), or commercial paper) and is subject to no

maximum limit, if the obligations do not have an interest rate that varies

inversely to market interest rate changes;

2. Government money market mutual funds or class one money market mutual

funds; or



3. Securities lending, repurchase, and reverse repurchase transactions that meet

all the requirements of Section 27 of this Act, except the quantitative limitations

of subsection (4) of Section 27 of this Act; or

(b) Invest only in investments that an insurer may acquire under this subtitle, if the

insurer's proportionate interest in the amount invested in these investments does not

exceed the applicable limits of this subtitle.

(2) For an investment in an investment pool to be qualified under this subtitle, the investment

pool shall not:

(a) Acquire securities issued, assumed, guaranteed, or insured by the insurer or an

affiliate of the insurer;

(b) Borrow or incur any indebtedness for borrowed money, except for securities lending

and reverse repurchase transactions that meet the requirements of Section 27 of this

Act, except the quantitative limitations of subsection (4) of Section 27 of this Act; or

(c) Permit the aggregate value of securities then loaned or sold to, purchased from, or

invested in any one (1) business entity under this section to exceed ten percent (10%)

of the total assets of the investment pool.

(3) The limitations of subsections (1) to (3) of Section 21 of this Act shall not apply to an

insurer's investment in an investment pool, however an insurer shall not acquire an

investment in an investment pool under this section if, as a result of and after giving effect

to the investment, the aggregate amount of investments then held by the insurer under this

section:

(a) In any one (1) investment pool would exceed ten percent (10%) of its admitted assets;

(b) In all investment pools investing in investments permitted under paragraph (b) of

subsection (1) of this section would exceed twenty-five percent (25%) of its admitted

assets; or

(c) In all investment pools would exceed forty percent (40%) of its admitted assets.

(4) For an investment in an investment pool to be qualified under this subtitle, the manager of

the investment pool shall:

(a) Be organized under the laws of the United States or a state and designated as the pool

manager in a pooling agreement;

(b) Be the insurer, an affiliated insurer or a business entity affiliated with the insurer, a

qualified bank, a business entity registered under the Investment Advisors Act of 1940

(15 U.S.C. sec. 80a-1 et seq.), as amended or, in the case of a reciprocal insurer or

interinsurance exchange, its attorney-in-fact, or in the case of a United States branch

of an alien insurer, its United States manager or affiliates or subsidiaries of its United

States manager;

(c) Compile and maintain detailed accounting records setting forth:

1. The cash receipts and disbursements reflecting each

participant's

proportionate investment in the investment pool;



2. A complete description of all underlying assets of the investment pool, including

amount, interest rate, maturity date if any, and other appropriate designations;

and

3. Other records that, on a daily basis, allow third parties to verify each

participant's investment in the investment pool; and

(d) Maintain the assets of the investment pool in one (1) or more accounts, in the name

of or on behalf of the investment pool, under a custody agreement with a qualified

bank. The custody agreement shall:

1. State and recognize the claims and rights of each participant;

2. Acknowledge that the underlying assets of the investment pool are held solely

for the benefit of each participant in proportion to the aggregate amount of its

investment in the investment pool; and

3. Contain an agreement that the underlying assets of the investment pool shall

not be commingled with the general assets of the custodian qualified bank or

any other person.

(5) The pooling agreement for each investment pool shall be in writing and shall provide that:

(a) An insurer and its affiliated insurers or, in the case of an investment pool investing

solely in investments permitted under paragraph (a) of subsection (1) of this section,

the insurer and its subsidiaries, affiliates, or any pension or profit sharing plan of the

insurer, its subsidiaries and affiliates or, in the case of a United States branch of an

alien insurer, affiliates or subsidiaries of its United States manager, shall, at all times,

hold one hundred percent (100%) of the interests in the investment pool;

(b) The underlying assets of the investment pool shall not be commingled with the general

assets of the pool manager or any other person;

(c) In proportion to the aggregate amount of each pool participant's interest in the

investment pool:

1. Each participant owns an undivided interest in the underlying assets of the

investment pool; and

2. The underlying assets of the investment pool are held solely for the benefit of

each participant;

(d) A participant, or in the event of the participant's insolvency, bankruptcy, or

receivership, its trustee, receiver, or other successor-in-interest, may withdraw all or

any portion of its investment from the investment pool under the terms of the pooling

agreement;

(e) Withdrawals may be made on demand without penalty or other assessment on any

business day, but settlement of funds shall occur within a reasonable and customary

period thereafter not to exceed five (5) business days. Distributions under this

paragraph shall be calculated in each case net of all then applicable fees and expenses

of the investment pool. The pooling agreement shall provide that the pool manager

shall distribute to a participant, at the discretion of the pool manager:

1. In cash, the then fair market value of the participant's pro rata share of each

underlying asset of the investment pool;



2. In kind, a pro rata share of each underlying asset; or

3. In a combination of cash and in-kind distributions, a pro rata share in each

underlying asset; and

(f) The pool manager shall make the records of the investment pool available for

inspection by the commissioner.


TO READ AS FOLLOWS:

(1) Subject to the limitations of Section 21 of this Act, an insurer may acquire equity interests

in business entities organized under the laws of any domestic jurisdiction.


giving effect to the investment, the aggregate amount of investments then held by the

insurer under this section would exceed the greater of twenty-five percent (25%) of its

admitted assets or one hundred percent (100%) of its surplus as regards policyholders.

(3) An insurer shall not acquire under this section any investments that the insurer may

acquire under Section 26 of this Act.

(4) An insurer shall not short sell equity investments unless the insurer covers the short sale

by owning the equity investment or an unrestricted right to the equity instrument

exercisable within six (6) months of the short sale.


TO READ AS FOLLOWS:

(1) (a) Subject to the limitations of Section 21 of this Act, an insurer may acquire tangible

personal property or equity interests therein located or used wholly or in part within a

domestic jurisdiction either directly or indirectly through limited partnership interests and

general partnership interests not otherwise prohibited by subsection (4) of Section 4 of this

Act, joint ventures, stock of an investment subsidiary or membership interests in a limited

liability company, trust certificates, or other similar instruments.

(b) Investments acquired under paragraph (a) of this subsection shall be eligible only if:

1. The property is subject to a lease or other agreement with a person whose rated

credit instruments in the amount of the purchase price of the personal property

the insurer could then acquire under Section 22 of this Act; and

2. The lease or other agreement provides the insurer the right to receive rental,

purchase, or other fixed payments for the use or purchase of the property, and

the aggregate value of the payments, together with the estimated residual value

of the property at the end of its useful life and the estimated tax benefits to the

insurer resulting from ownership of the property, shall be adequate to return

the cost of the insurer's investment in the property, plus a return deemed

adequate by the insurer.

(2) The insurer shall compute the amount of each investment under this section on the basis

of the out-of-pocket purchase price and applicable related expenses paid by the insurer for

the investment, net of each borrowing made to finance the purchase price and expenses, to

the extent the borrowing is without recourse to the insurer.




giving effect to the investment, the aggregate amount of all investments then held by the

insurer under this section would exceed;

(a) Two percent (2%) of its admitted assets; or

(b) One-half of one percent (0.5%) of its admitted assets as to any single item of tangible

personal property.

(4) For purposes of determining compliance with the limitations of Section 21 of this Act,

investments acquired by an insurer under this section shall be aggregated with those

acquired under Section 22 of this Act, and each lessee of the property under a lease referred

to in this section shall be deemed the issuer of an obligation in the amount of the investment

of the insurer in the property determined as provided in subsection (2) of this section.

(5) Nothing in this section is applicable to tangible personal property lease arrangements

between an insurer and its subsidiaries and affiliates under a cost-sharing arrangement or

agreement permitted under KRS 304.37-030.


TO READ AS FOLLOWS:

(1) Subject to the limitations of Section 21 of this Act, an insurer may acquire, either directly

or indirectly through limited partnership interests and general partnership interests not

otherwise prohibited by subsection (4) of Section 4 of this Act, joint ventures, stock of an

investment subsidiary or membership interests in a limited liability company, trust

certificates, or other similar instruments, obligations secured by mortgages on real estate

situated within a domestic jurisdiction, but a mortgage loan that is secured by other than a

first lien shall not be acquired unless the insurer is the holder of the first lien. The

obligations held by the insurer and any obligations with an equal lien priority, shall not, at

the time of acquisition of the obligation, exceed:

(a) Ninety percent (90%) of the fair market value of the real estate, if the mortgage loan

is secured by a purchase money mortgage or like security received by the insurer upon

disposition of the real estate;

(b) Eighty percent (80%) of the fair market value of the real estate, if the mortgage loan

requires immediate scheduled payments in periodic installments of principal and

interest, has an amortization period of thirty (30) years or less, and periodic payments

made no less frequently than annually. Each periodic payment shall be sufficient to

assure that at all times the outstanding principal balance of the mortgage loan shall

not be greater than the outstanding principal balance that would be outstanding

under a mortgage loan with the same original principal balance, with the same

interest rate, and requiring equal payments of principal and interest with the same

frequency over the same amortization period. Mortgage loans permitted under this

subsection are permitted notwithstanding the fact that they provide for a payment of

the principal balance prior to the end of the period of amortization of the loan. For

residential mortgage loans, the eighty percent (80%) limitation may be increased to

ninety-seven percent (97%) if acceptable private mortgage insurance has been

obtained; or

(c) Seventy-five percent (75%) of the fair market value of the real estate for mortgage

loans that do not meet the requirements of paragraph (a) or (b) of this subsection.



(2) For purposes of subsection (1) of this section, the amount of an obligation required to be

included in the calculation of the loan-to-value ratio may be reduced to the extent the

obligation is insured by the Federal Housing Administration, guaranteed by the

Administrator of Veteran Affairs, or their successors.

(3) A mortgage loan that is held by an insurer under subsection (7) of Section 2 of this Act or

acquired under this section and is restructured in a manner that meets the requirement of

a restructured mortgage loan in accordance with the NAIC Accounting Practices and

Procedures Manual or successor publication shall continue to qualify as a mortgage loan

under this subtitle.

(4) Subject to the limitations of Section 21 of this Act, credit lease transactions that do not

qualify for investment under Section 22 of this Act with the following characteristics shall

be exempt from the provisions of subsection (1) of this section:

(a) The loan amortizes over the initial fixed lease term at least in an amount sufficient so

that the loan balance at the end of the lease term does not exceed the original

appraised value of the real estate;

(b) The lease payments cover or exceed the total debt service over the life of the loan;

(c) A tenant or its affiliated entity whose rated credit instruments have a SVO 1 or 2

designation or a comparable rating from a nationally recognized statistical rating

organization recognized by the SVO has a full faith and credit obligation to make the

lease payments;

(d) The insurer holds or is the beneficial holder of a first lien mortgage on the real estate;

(e) The expenses of the real estate are passed through to the tenant excluding exterior,

structural, parking, and heating, ventilation and air conditioning replacement

expenses, unless annual escrow contributions, from cash flows derived from the lease

payments, cover the expense shortfall; and

(f) There is a perfected assignment of the rents due under the lease to or for the benefit

of the insurer.

(5) An insurer may acquire, manage, and dispose of real estate situated in a domestic

jurisdiction either directly or indirectly through limited partnership interests and general

partnership interests not otherwise prohibited by subsection (4) of Section 4 of this Act,

joint ventures, stock of an investment subsidiary or membership interests in a limited

liability company, trust certificates, or other similar instruments. The real estate shall be

income producing or intended for improvement or development for investment purposes

under an existing program, in which case the real estate shall be deemed to be income

producing.

(6) The real estate may be subject to mortgages, liens, or other encumbrances, the amount of

which shall, to the extent that the obligations secured by the mortgages, liens, or

encumbrances are without recourse to the insurer, be deducted from the amount of the

investment of the insurer in the real estate for purposes of determining compliance with

subsections (9) and (10) of this section.

(7) An insurer may acquire, manage, and dispose of real estate for the convenient

accommodation of the insurer's, which may include its affiliates, business operations,

including home office, branch office, and field office operations.



(a) Real estate acquired under this subsection may include excess space for rent to others

if the excess space, valued at its fair market value, would otherwise be a permitted

investment under subsections (5) and (6) of this section and is so qualified by the

insurer;

(b) The real estate acquired under this subsection may be subject to one (1) or more

mortgages, liens, or other encumbrances, the amount of which shall, to the extent that

the obligations secured by the mortgages, liens, or encumbrances are without

recourse to the insurer, be deducted from the amount of the investment of the insurer

in the real estate for purposes of determining compliance with subsection (11) of this

section; and

(c) For purposes of this subsection, "business operations" shall not include that portion

of real estate used for the direct provision of health care services by an insurer whose

insurance premiums and required statutory reserves for accident and health

insurance constitute at least ninety-five percent (95%) of total premium

considerations or total statutory required reserves, respectively. An insurer may

acquire real estate used for these purposes under subsections (5) and (6) of this

section.

(8) An insurer shall not acquire an investment under subsections (1) to (4) of this section if, as

a result of and after giving effect to the investment, the aggregate amount of all investments

then held by the insurer under subsections (1) to (4) of this section would exceed:

(a) One percent (1%) of its admitted assets in mortgage loans covering any one (1)

secured location;

(b) One-quarter of one percent (0.25%) of its admitted assets in construction loans

covering any one (1) secured location; or

(c) One percent (1%) of its admitted assets in construction loans in the aggregate.

(9) An insurer shall not acquire an investment under subsections (5) and (6) of this section if,

a result of and after giving effect to the investment and any outstanding guarantees made

by the insurer in connection with the investment, the aggregate amount of investments then

held by the insurer under subsections (5) and (6) of this section plus the guarantees then

outstanding would exceed:

(a) One percent (1%) of its admitted assets in any one (1) parcel or group of contiguous

parcels of real estate, except that this limitation shall not apply to that portion of real

estate used for the direct provision of health care services by an insurer whose



considerations or total statutory required reserves, respectively, such as hospitals,

medical clinics, medical professional buildings, or other health facilities used for the

purpose of providing health services; or

(b) The lesser of ten percent (10%) of its admitted assets or forty percent (40%) of its

surplus as regards policyholders in the aggregate, except for an insurer whose



considerations or total statutory required reserves, respectively, this limitation shall

be increased to fifteen percent (15%) of its admitted assets in the aggregate.



(10) An insurer shall not acquire an investment under subsections (1) to (6) of this section if, as

a result of and after giving effect to the investment and any guarantees it has made in

connection with the investment, the aggregate amount of all investments then held by the

insurer under subsections (1) to (6) of this section plus the guarantees then outstanding

would exceed twenty-five percent (25%) of its admitted assets.

(11) The limitations of Section 21 of this Act shall not apply to an insurer's acquisition of real

estate under subsection (7) of this section. An insurer shall not acquire real estate under

subsection (7) of this section if, as a result of and after giving effect to the acquisition, the

aggregate amount of all real estate then held by the insurer under subsection (7) of this

section would exceed ten percent (10%) of its admitted assets. With the permission of the

commissioner, additional amounts of real estate may be acquired under subsection (7) of

this section.


TO READ AS FOLLOWS:

An insurer may enter into securities lending, repurchase, reverse repurchase and dollar roll

transactions with business entities, subject to the following requirements:

(1) The insurer's board of directors shall adopt a written plan that is consistent with the

requirements of the written plan in subsection (1) of Section 3 of this Act that specifies

guidelines and objectives to be followed, such as:

(a) A description of how cash received will be invested or used for general corporate

purposes of the insurer;

(b) Operational procedures to manage interest rate risk, counterparty default risk, the

conditions under which proceeds from reverse repurchase transactions may be used

in the ordinary course of business, and the use of acceptable collateral in a manner

that reflects the liquidity needs of the transaction; and

(c) The extent to which the insurer may engage in these transactions.

(2) The insurer shall enter into a written agreement for all transactions authorized in this

section other than dollar roll transactions. The written agreement shall require that each

transaction terminate not more than one (1) year from its inception or upon the earlier

demand of the insurer. The agreement shall be with the business entity counterparty, but

for securities lending transactions, the agreement may be with an agent acting on behalf

of the insurer, if the agent is a qualified business entity, and if the agreement:

(a) Requires the agent to enter into separate agreements with each counterparty that are

consistent with the requirements of this section; and

(b) Prohibits securities lending transactions under the agreement with the agent or its

affiliates.

(3) Cash received in a transaction under this section shall be invested in accordance with this

subtitle and in a manner that recognizes the liquidity needs of the transaction or used by

the insurer for its general corporate purposes. For so long as the transaction remains

outstanding, the insurer, its agent, or custodian shall maintain, as to acceptable collateral

received in a transaction under this section, either physically or through the book entry

systems of the Federal Reserve, Depository Trust Company, Participants Trust Company,

or other securities depositories approved by the commissioner:



(a) Possession of the acceptable collateral;

(b) A perfected security interest in the acceptable collateral; or

(c) In the case of a jurisdiction outside of the United States, title to, or rights of a secured

creditor to, the acceptable collateral.

(4) The limitations of Sections 21 and 28 of this Act shall not apply to the business entity

counterparty exposure created by transactions under this section. For purposes of

calculations made to determine compliance with this subsection, no effect will be given to

the insurer's future obligation to resell securities, in the case of a repurchase transaction,

or to repurchase securities, in the case of a reverse repurchase transaction. An insurer shall

not enter into a transaction under this section if, as a result of and after giving effect to the

transaction:

(a) The aggregate amount of securities then loaned, sold to, or purchased from any one

(1) business entity counterparty under this section would exceed five percent (5%) of

its admitted assets. In calculating the amount sold to or purchased from a business

entity counterparty under repurchase or reverse repurchase transactions, effect may

be given to netting provisions under a master written agreement; or

(b) The aggregate amount of all securities then loaned, sold to, or purchased from all

business entities under this section would exceed forty percent (40%) of its admitted

assets, but the limitation of this subsection shall not apply to reverse repurchase

transactions for so long as the borrowing is used to meet operational liquidity

requirements resulting from an officially declared catastrophe and subject to a plan

approved by the commissioner.

(5) In a securities lending transaction, the insurer shall receive acceptable collateral having a

market value as of the transaction date at least equal to one hundred two percent (102%)

of the market value of the securities loaned by the insurer in the transaction as of that date.

If at any time the market value of the acceptable collateral is less than the market value of

the loaned securities, the business entity counterparty shall be obligated to deliver

additional acceptable collateral, the market value of which, together with the market value

of all acceptable collateral then held in connection with the transaction, at least equals one

hundred two percent (102%) of the market value of the loaned securities.

(6) In a reverse repurchase transaction, other than a dollar roll transaction, the insurer shall

receive acceptable collateral having a market value as of the transaction date at least equal

to ninety-five percent (95%) of the market value of the securities transferred by the insurer

in the transaction as of that date. If at any time the market value of the acceptable collateral

is less than ninety-five percent (95%) of the market value of the securities so transferred,

the business entity counterparty shall be obligated to deliver additional acceptable

collateral, the market value of which, together with the market value of all acceptable

collateral then held in connection with the transaction, at least equals ninetyfive percent

(95%) of the market value of the transferred securities.

(7) In a dollar roll transaction, the insurer shall receive cash in an amount at least equal to

the market value of the securities transferred by the insurer in the transaction as of the

transaction date.

(8) In a repurchase transaction, the insurer shall receive as acceptable collateral transferred

securities having a market value at least equal to one hundred two percent (102%) of the



purchase price paid by the insurer for the securities. If at any time the market value of the

acceptable collateral is less than one hundred percent (100%) of the purchase price paid

by the insurer, the business entity counterparty shall be obligated to provide additional

acceptable collateral, the market value of which, together with the market value of all

acceptable collateral then held in connection with the transaction, at least equals one

hundred two percent (102%) of the purchase price. Securities acquired by an insurer in a

repurchase transaction shall not be sold in a reverse repurchase transaction, loaned in a

securities lending transaction, or otherwise pledged.


TO READ AS FOLLOWS:

(1) Subject to the limitations of Section 21 of this Act, an insurer may acquire foreign

investments, or engage in investment practices, with persons of or in foreign jurisdictions

of substantially the same types as those that an insurer is permitted to acquire under this

subtitle, other than of the type permitted under Section 23 of this Act, if, as a result of and

after giving effect to the investment:

(a) The aggregate amount of foreign investments then held by the insurer under this


(b) The aggregate amount of foreign investments then held by the insurer under this

subsection in a single foreign jurisdiction does not exceed ten percent (10%) of its

admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1

or five percent (5%) of its admitted assets as to any other foreign jurisdiction.

(2) Subject to the limitations of Section 21 of this Act, an insurer may acquire investments, or

engage in investment practices denominated in foreign currencies, whether or not they are

foreign investments acquired under subsection (1) of this section, or additional foreign

currency exposure as a result of the termination or expiration of a hedging transaction with

respect to investments denominated in a foreign currency, if:

(a) The aggregate amount of investments then held by the insurer under this subsection

denominated in foreign currencies does not exceed fifteen percent (15%) of its

admitted assets; and

(b) The aggregate amount of investments then held by the insurer under this subsection

denominated in the foreign currency of a single foreign jurisdiction does not exceed

ten percent (10%) of its admitted assets to a foreign jurisdiction that has a sovereign

debt rating of SVO 1 or five percent (5%) of its admitted assets as to any other foreign

jurisdiction;

(c) However, an investment shall not be considered denominated in a foreign currency if

the acquiring insurer enters into one (1) or more contracts in transactions permitted

under Section 29 of this Act and the business entity counterparty agrees under the

contract or contracts to exchange all payments made on the foreign currency

denominated investment for United States currency at a rate that effectively insulates

the investment cash flows against future changes in currency exchange rates during

the period the contract or contracts are in effect.


that is authorized to do business in a foreign jurisdiction and that has outstanding



insurance, annuity, or reinsurance contracts on lives or risks resident or located in a



denominated in the currency of that jurisdiction subject to the limitations set

forth in Section 21 of this Act. However, investments made under this subsection in

obligations of foreign governments, their political subdivisions, and government sponsored

enterprises shall not be subject to the limitations of Section 21 of this Act if those

investments carry an SVO rating of 1 or 2. The aggregate amount of investments acquired

by the insurer under this subsection shall not exceed the greater of:

(a) The amount the insurer is required by law to invest in the foreign jurisdiction; or

(b) One hundred twenty-five percent (125%) of the amount of its reserves, net of

reinsurance, and other obligations under the contracts.


that is not authorized to do business in a foreign jurisdiction but that has outstanding

insurance, annuity, or reinsurance contracts on lives or risks resident or located in a



denominated in the currency of that jurisdiction subject to the limitations set forth in

Section 21 of this Act. However, investments made under this subsection in obligations of

foreign governments, their political subdivisions, and government sponsored enterprises

shall not be subject to the limitations of Section 21 of this Act if those investments carry an

SVO rating of 1 or 2. The aggregate amount of investments acquired by the insurer under

this subsection shall not exceed one hundred five percent (105%) of the amount of its

reserves, net of reinsurance, and other obligations under the contracts on risks resident or

located in the foreign jurisdiction.

(5) Investments acquired under this section shall be aggregated with investments of the same

types made under this subtitle, and in a similar manner, for purposes of determining

compliance with the limitations of this subtitle, if any. Investments in obligations of foreign

governments, their political subdivisions, and government sponsored enterprises of these

persons, except for those exempted under subsections (3) and (4) of this section, shall be

subject to the limitations of Section 21 of this Act.


TO READ AS FOLLOWS:

(1) An insurer may, directly or indirectly through an investment subsidiary, engage in

derivative transactions under this section under the following conditions:

(a) An insurer may use derivative instruments under this section to engage in hedging

transactions and certain income generation transactions, as these terms may be

further defined in administrative regulations promulgated by the commissioner.

(b) An insurer shall be able to demonstrate to the commissioner the intended hedging

characteristics and the ongoing effectiveness of the derivative transaction or

combination of transactions through cash flow testing or other appropriate analyses.

(2) An insurer may enter into hedging transactions under this section if, as a result of and after

giving effect to the transaction:



(a) The aggregate statement value of options, caps, floors, and warrants not attached to

another financial instrument purchased and used in hedging transactions does not

exceed seven and one-half percent (7.5%) of its admitted assets;

(b) The aggregate statement value of options, caps, and floors written in hedging

transactions does not exceed three percent (3%) of its admitted assets; and

(c) The aggregate potential exposure of collars, swaps, forwards, and futures used in

hedging transactions does not exceed six and one-half percent (6.5%) of its admitted

assets.

(3) An insurer may only enter into the following types of income generation transactions if, as

a result of and after giving effect to the transactions, the aggregate statement value of the

fixed income assets that are subject to call plus the face value of fixed income securities

underlying a derivative instrument subject to call, plus the amount of the purchase

obligations under the puts, does not exceed ten percent (10%) of its admitted assets:

(a) Sales of covered call options on noncallable fixed income securities, callable fixed

income securities if the option expires by its terms prior to the end of the noncallable

period, or derivative instruments based on fixed income securities;

(b) Sales of covered call options on equity securities, if the insurer holds in its portfolio,

or can immediately acquire through the exercise of options, warrants, or conversion

rights already owned, the equity securities subject to call during the complete term of

the call option sold; or

(c) Sales of covered puts on investments that the insurer is permitted to acquire under

this subtitle, if the insurer has escrowed, or entered into a custodian agreement

segregating, cash or cash equivalents with a market value equal to the amount of its

purchase obligations under the put during the complete term of the put option sold.

(4) An insurer shall include all counterparty exposure amounts in determining compliance

with the limitations of Section 21 of this Act.

(5) In accordance with administrative regulations promulgated under Section 6 of this Act, the

commissioner may approve additional transactions involving the use of derivative

instruments in excess of the limits of subsection (2) of this section or for other risk

management purposes under administrative regulations promulgated by the commissioner,

but replication transactions shall not be permitted for other than risk management

purposes.


TO READ AS FOLLOWS:

(1) An insurer may acquire under this section investments, or engage in investment practices,

of any kind that are not specifically prohibited by this subtitle, or engage in investment

practices, without regard to any limitation in Sections 21 to 28 of this Act, but an insurer

shall not acquire an investment or engage in an investment practice under this section if,

as a result of and after giving effect to the transaction, the aggregate amount of the

investments then held by the insurer under this section would exceed the greater of:

(a) Its unrestricted surplus;

or (b) The lesser of:



1. Ten percent (10%) of its admitted assets; or

2. Fifty percent (50%) of its surplus as regards policyholders.

(2) An insurer shall not acquire any investment or engage in any investment practice under

paragraph (b) of subsection (1) of this section if, as a result of and after giving effect to the

transaction, the aggregate amount of all investments in any one (1) person then held by the

insurer under that subsection would exceed five percent (5%) of its admitted assets.

Section 31. KRS 304.7-240 is amended to read as follows:

(1) The amounts allocated to each separate account established by the insurer in connection with

a pension, retirement or profit-sharing plan, life insurance or an annuity pursuant to KRS

304.15-390 together with accumulations thereon, may be invested and reinvested in any class

of investments which may be authorized in the written contract or agreement without regard

to any requirements or limitations prescribed by this subtitle; except, that to the extent that

the insurer's reserve liability with regards to:

(a)[(1)] Benefits guaranteed as to amount and duration; and

(b)[(2)] Funds guaranteed as to principal amount or stated rate of interest, is maintained in

any separate account, a portion of the assets of such separate account at least equal to

such reserve liability shall be invested in accordance with the applicable provisions of

this subtitle.

The investments in such separate account or accounts shall not be taken into account in applying

the investment limitations applicable to other investments of the insurer.

(2) On application by an insurer, the commissioner may approve different investment

limitations and restrictions for specified separate accounts of the insurer. The

commissioner shall only approve the insurer's proposed limitations and restrictions if he

finds that the requested investment limitations and restrictions adequately protect the

interests of the insured protected by the separate account and the solvency of the insurer.


(1) An insurer may enter into an agreement for the purpose of protecting its interests in securities

lawfully held by it, or for the purpose of reorganization of the corporation which issued or is

obligated on account of the[such] securities, and may deposit the[such] securities with a

committee appointed under[ such] an agreement.

(2) An insurer may accept corporate stocks, bonds or other securities distributed in accordance

with the[pursuant to any such] agreement or reorganization. Any securities so received which

are otherwise ineligible as investments of the insurer shall be disposed of as provided in

Section 2 of this Act[KRS 304.7-300].


An insurer shall not invest in any note or other evidence of indebtedness of any director or officer

of the insurer, except as to policy loans authorized under Section 5 of this Act[KRS 304.7-180] and

obligations subject to Section 13 of this Act[the provisions of KRS 304.7-200] secured by first

mortgages or deeds of trust upon improved real property to be occupied as a personal residence by

such director or officer of the insurer.




(1) All obligations having a fixed term, rate, and face value held by an insurer authorized to do

business in this state may, if amply secured and not in default either as to principal or interest,

be valued as follows: if acquired at face value, at the face value; if acquired above or below

face value, on the basis of the purchase price adjusted annually to bring the value

to face value at maturity and so as to yield in each year the effective rate of interest at which

the purchase was made. The amortization provided for in this subsection may be calculated

with reasonable approximations. The commissioner shall have the power to determine by rule

the eligibility of investments for valuation under this subsection.

(2) (a) Securities, other than those referred to in subsection (1) of this section, held by an insurer

shall be valued, in the discretion of the commissioner, at their fair market value, at their

appraised value, or at prices determined by the commissioner as representing their fair market

value.

(b) Preferred or guaranteed stock or shares while paying full dividends may be carried at a

fixed value in lieu of market value, at the discretion of the commissioner and in

accordance with the method of computation he approves.

(c) Securities qualifying under KRS 304.7-120, Section 18 of this Act, or Section 30 of this

Act[and 304.7-270] shall be valued at their fair value or net equity value, except that

securities of a subsidiary insurance corporation as provided for in KRS 304.7-120 shall

be valued either at cost or on a net equity basis, whichever is greater.

(3) (a) Real property acquired pursuant to a mortgage loan or contract for sale, in the absence of

a recent appraisal deemed by the commissioner to be reliable, shall not be valued at an amount

greater than the unpaid principal of the defaulted loan or contract at the date of acquisition,

together with any taxes and expenses paid or incurred in connection with acquisition, and the

cost of improvements thereafter made by the insurer and any amounts thereafter paid by the

insurer on assessments levied for improvements in connection with the property.

(b) Other real property held by an insurer shall not be valued at an amount in excess of fair

value as determined by recent appraisal deemed by the commissioner to be reliable. If

valuation is based on an appraisal more than three (3) years old, the commissioner may,

at his discretion, call for and require a new appraisal in order to determine fair value.

(c) Personal property acquired pursuant to chattel mortgages or security agreements[ made

in accordance with subsection (10) of KRS 304.7-200] shall not be valued at an amount

greater than the unpaid principal of the defaulted loan at the date of acquisition, together

with any taxes and expenses paid or incurred in connection with acquisition, or the fair

value of the property, whichever amount is the lesser.

(4) However, in all cases securities shall be valued in accordance with the standards promulgated

by[ the securities valuation office of] the National Association of Insurance Commissioners

including the Purposes and Procedures of the Securities Valuation Office, the Valuation

of Securities Manual, the Accounting Practices and Procedures Manual, the Annual

Statement Instructions, or any successor valuation procedures officially adopted by the

NAIC[and other assets shall be valued in accordance with standards promulgated by the

National Association of Insurance Commissioners Financial Condition Subcommittee].

Section 35. The following KRS sections are repealed:

304.7-020 Eligible investments.



304.7-030 General qualifications.

304.7-040 Authorization.

304.7-050 Diversification.

304.7-060 Public obligations.

304.7-070 Obligations and stock of certain federal and international agencies.

304.7-080 Corporate obligations.

304.7-085 Unconditional obligations.

304.7-090 Definitions of "obligations" and "institution." 304.7-100

Preferred or guaranteed stocks.

304.7-110 Common stocks.

304.7-120 Stock of subsidiaries -- Investment in foreign companies.

304.7-130 Equipment securities.

304.7-140 Acceptances, bills of exchange.

304.7-145 Limitation on investments -- Quality ratings for securities.

304.7-150 Savings institutions.

304.7-160 Common trust funds, mutual funds.

304.7-170 Hydrocarbon production payments.

304.7-180 Policy loans.

304.7-190 Collateral loans.

304.7-200 Mortgage loans.

304.7-205 Mortgage pass-through securities.

304.7-210 Real estate.

304.7-220 Housing developments.

304.7-230 Leased property.

304.7-260 Investments in foreign countries.

304.7-265 Bona fide hedging transactions.

304.7-270 Miscellaneous investments.

304.7-290 Time limit for disposal of real estate.

304.7-300 Time limit for disposal of other property and securities.

304.7-310 Failure to dispose of real estate, personal property or securities.

304.7-340 Prohibited investments.

Approved April 7, 2000

chapter 388 (hb 634) - legislative research commission · section 1. a new section of subtitle 7 of...

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